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During the pandemic crisis, the federal government sent out checks for a host of programs. An...

During the pandemic crisis, the federal government sent out checks for a host of programs. An administrator for one of these programs commented: “These tax checks should help keep interest rates low or help them decline even further from their current levels.” Critically evaluate this statement (i.e., true, false, and why).

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Answer #1

Above statement is true.

Because since government adopts expansionary fiscal policy by reducing taxes it is imperative for Federal reserve to pursue strategy in line with government and thus adopts an expansionary monetary policy by cutting interest rates and thus interest rates decline further to boost liquidity and alleviate economic recession due to pandemic.

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