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4. (20 points) The Liberal government in Canada announced plans in November 2020 to spend between $70 billion and $100 billion over three years on
4. (20 points) The Liberal government in Canada announced plans in November 2020 to spend between $70 billion and $100 billion over three years on economic stimulus measures. Recent estimates (April 2021) by RBC Bank suggest that households in Canada have $220 billion of cash sitting on hand in Canadian banks - $180 billion more than is normal, and equal to about 10 per cent of Canada's economy. In addition there is also more cash sitting on companies' balance sheets. Answer the following questions using this information. a. What is the likely source of these huge pools of savings? b. What implications do they have for the role of government fiscal policy moving forward? Discuss in your answer a possible reason for why the government wants to do this type of fiscal policy. c. If you were advising the Canadian government, what would you recommend on the planned economic stimulus measures? Discuss in your answer how differences in the wealth distribution might be relevant for fiscal policy
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