Question

What would you recommend for the government to do today during the COVID crisis? How will this help the economy?

Answer 1

Due to COVID - 19, people are saving their money rather than spending except on necessary goods. It will result in fall in consumer expenditure and reduce the circulation of money in the economy. Fall in circulation of money will result in fear of recessions in the economy. Government can adopt expansionary fiscal policy through which they raise government spending and reduce tax such that people have more money to spend on goods and services and raise aggregate demand in the economy. They can raise their spending on healthcare facilities, unemployment benefits, supporting MNCs such that they do not fire their employees to avoid high rate of unemployment etc.