ECON - ECON extra mark PDF

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ECN 506 Bonus Assignment Due Wednesday, April 1 2020

What monetary and fiscal policies will purposefully provide economic motivation in such an unparalleled crisis, while also reducing the inflation of relative money supply?

Within a globalized economy, a pandemic that contains a high infection rate and extremely contagious incubation period, poses a great threat to a highly active economy with a large population density. A threat like a pandemic instills fear, and the possibility of illness and death across the world. This has caused many countries to take federal action to ensure that precautions are taken to reassure citizens that there are ways that they can stay safe and clear of the disease. Some preventive measures will be put in place depending on the severity of the disease within the country, this can range from the closing of unessential businesses or a complete country shut down if things were to escalate. Due to the closing of businesses, airlines, tourism companies, restaurants, and any small businesses that are non-essential, experience a great loss of demand and will struggle to operate under the current economic conditions. Unfortunately, un-essential companies that have experienced a large loss of demand will not be able to repay current debt without government aid. This has led companies to lay of employees as they are unable to pay them, which causes unemployment rates to increase and more individuals applying for employment insurance. Federal governments have realized that employees’ hours are getting cut or they are being laid of all together. In order to aid these individuals, they have stepped in by cutting interest rates, allowing bills to get paid at a later date, and to defer mortgage payments to ease any financial worries.

In a few short sentences, please give me your own thoughts on the purpose of this policy and its potential short-term and long-term effects?

The Bank of Canada has already introduced multiple stimulus packages pertaining to diferent scenarios afected by the current global pandemic. This includes the Federal Government supporting its economy with an $82 billion economic stimulus package that support all sorts of issues in the current economic state including; Income support to those who need it the most, Flexibility for taxpayers, Mortgage deferrals, Helping businesses keep their employees, Ensuring businesses have access to credit, and flexibility for businesses paying taxes. These monetary and fiscal policies will ensure the economy stays somewhat positive during these uncertain times. Many Federal Governments including Canada have already pro-actively cut rates to increase confidence in investors and allow the cost of borrowing to be convenient. Not only does the Government have to worry about the economy financially, but they need to ensure safety is number one priority. Especially the countries with limited medical supplies and infrastructure to efficiently provide treatment for the thousands of people that are infected. All in all, when it comes to the current unparalleled crisis and economic devastation, multiple banks have done everything in their power to create monetary and fiscal policies on the spot. By creating these economic stimulus packages will have an efect on inflation of relative money supply in the foreseeable future, as these consequences are not prioritized in these economic circumstances....