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Context: Given the need for an economic recovery plan in response to the macroeconomic devastation of the Covid-19 lockdown impacts, let us suppose that the

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Given the need for an economic recovery plan in response to the macroeconomic devastation of the Covid-19 lockdown impacts, let us suppose that the SA government sensibly follows the path of many of appropriately engaged countries, by relying largely on expansionary fiscal policy.

Question:

Which specific kind of fiscal policy should the government deploy - direct government spending or reduction in taxes - and why? (Marks: 8)

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