Question 2: Analysis of Policy Changes in the Pandemic

Version 2 - 2B - Fiscal Policy

a. Investigate the following key data during the 3-5 year period before Covid and in 2020:

i. its recent tax and government spending

ii. the budget situation (in surplus/deficit)

iii. the importance of general government expenditure in GDP (measured as % of the GDP)

iv. the ratio of government debt to GDP

Highlighting changes in 2020 with the previous years as a response to the COVID-19

outbreak.

b. Assess impacts of the policy change, if any. Use the AS/AD diagram to highlight the

theoretical impacts of the policy on the economy. Use the real data from your

observations/data set to highlight and analyze significant changes in the AD and/or SRAS

as a result of the policy change.

c. In reality, what can possibly reduce the multiplier impact of fiscal policy? What can

increase the crowding-out effect? Discuss the effectiveness of fiscal policy in your

country based on these.