Question

Please can you explain in more than two paragraphs the potential impacts of recent changes in the US monetary policy by the FED on the US economy in terms of COVID-19

Answer 1

The Pandemic COVID-19 has caused a fall in the output level and economic activities. Now the economy is heading towards the recession that might be severe and would cause the rise in unemployment incredibly.

Fed Reserve is pursuing an expansionary monetary policy to deal with such a situation. The Fed is likely to go for a quantitative easing program as well. The use of expansionary monetary policy would cause the fall in the interest rate and investment and consumer spending would be supported by such a move. These actions will motivate more economic activities.

Here both monetary and fiscal policies are going to be expansionary, thus impacts of such actions might be in form of increased price level.