Question

Budget Deficit in light of COVID-19: What it means for Canada?

Read the following articles to formulate your idea and discuss the above question:

"Canada’s Budget Deficit To Hit $180 Billion In COVID-19 Crisis" "How will Canada pay for its Covid-19 response?"

Answer 1

Answer - In the current pandemic situation , when the whole world is suffering from recession , economic activities have been closed down. The people dont have work , their income levels have dropped. Hence the government has to take huge debts in order to keep the economy going during lockdown situation. The government has accumulated huge debt of $ 180 billion.

Now , paying it off will be a big head ache for the government. It will have to reduce its spending , increase the tax rates. The interest rates in the economy will rise to reduce the debts. This will be the way to payback the debts. This could in return take back the economy into a long recession. The other way could be to print more currency to pay back the debts . This will raise inflation rates in economy.