Question

Federal Reserve Chair Jerome Powell has urged, “This is the time to use the great fiscal power of the United States to do what we can to support the economy and try to get through this with as little damage to the longer-run productive capacity of the economy as possible.”

Briefly describe two specific fiscal stimulus policies the Federal government can use to improve our productive capacity in the long run.

Answer 1

Answer - The fiscal policy for the long term stimulus are as follows -

Increased government spending - The increased government spending on education , health , training to the workers will help to boost the productivity. It will help to increase the investment and employment in the economy , thus increasing output in long run

Decrease in Tax rates - The decrease in the tax rate bring the change in the disposable income of public and also affects the saving rate. This saving is used for the future consumption. This will also lead to the long term positive effect on the economy