Question

Assume that Covid-19 leads Brazil government financial/economic crisis

Propose policies to be taken by the government to help the country come out from the crisis. Please explain your recommendations using any models or theoretical frameworks learned in macroeconomics class. For example, you can explain your suggestion using money market, labour market, IS-LM model or AD-AS model.

Answer 1

To cone out from crisis, Brazil must incorporate expansionary fiscal policy by reducing taxes and inducing higher spending and automatic stabilizers and an expansionary monetary policy by cutting interest rates and buying back government securities and bonds to infuse liquidity into market.

This helps spur consumptions and disposable incomes and thus aggregate demand curves shifts rightwards and thus the real GDP and prices go up alleviating economy from recession.

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answered by: anonymous