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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 - The expansionary fiscal and monetary policies will be needed to get the economy out of this slump. The increased government sepnding such as the CARES Act , decrease in the taxes , increase in the money supply through the expansionary monetary policies will lead to greater consumption and investment , thus increasing the AD , increasing the price level and decrease in unemployement. This will prevent the economy from going into more recession and remove the slump.

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