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As businesses reopen after the shut down response to the Covid virus, the unemployment rate is...

As businesses reopen after the shut down response to the Covid virus, the unemployment rate is exceptionally high and the economy is likely producing far below its potential. Identify a policy that may help lift the economy out of this slump. Present an analysis where you explain the impact you expect from your policy on output, prices, wages, employment, and unemployment.

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Answer - In the event of the covid 19 , the government through its fiscal policy and fed through monetary policy should expand the money supply by expansionary policies . These policies will lead to the increase in the money supply. The interest rates will drop and the borrowing will become cheaper. This will lead to increase in consumption, investment and government spending. This will increase the valuen of AD and prevent the economy from going into the trough.

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