Question

Initial Response After reading chapters 16 & 21, briefly describe the difference between Fiscal & Monetary policies. Next identify at least one fiscal and one monetary policy that was instituted in March 2020 in response to the COVID-19 crisis to help with economic recovery. Using the AD AS model, explain how these policies were expected to work.

Answer 1

Fiscal (1) These - undertaken by 13 (3.) There is no to consulate investment Policy Monetary Policy policies all related (2.) These policies au related to to matter of gout spending interest rate and money supply transfus, taxation et changes (2) These are undertaken (2.) These are by government (political central bank executive) (37 Tools include: specific | (3.) There all usually targets eig taught in fiscal policy taget inflation de money supply (4.) It's role was emphasiz- (4.) Monetarists believe no monetary Keynes policies au in AD management Monetary policy : Expausionary monetary policy by fed & it reduced the benchmark fed funds rate to Jew and large treasury Imatgage backed securities. Impact : This will shift money supply to right sector and will - ed more noe by effective than fiscal policy ie scale asset purchases of gout. neal cause AD to rise. US in earning upto as shift AD Fiscal Policy: Expasionary policy has been undertaken by gout in the form of $50 billion in emergency frending to states dº tewitowies · Awund. $ 600 billion direct payments of $1200 to Ameilaus $75000 Impact: This will it will rightwand use in disposable income which translate into consumption expenditure. Diagramatic refpresentation Due to COULD, ADo shift to AD, causing output to fall by Heli Cause a & Puiu$ ) LRAS SASO P₂. Pp There ocuy a recession ADO AD2 -ary gap of Yile ADI O Yo Y Yo Real GDP AD2 Que to expansionany policies. As shifts lightwand raising real abp to oy, level ( closer to Yf). Also, perce level rises from P, to P₂ due to the policy action Scanned with CamScanner CS Scanned with CamScanner