instruction: First, please read the scenario provided carefully. Then answer the questions below by using economic concepts and theories.Your answers should be logical and in full sentences.

Scenario: Prime Minister outlines Canada's COVID-19 response COVID-19 is a rapidly evolving global challenge. The Government of Canada is working closely with local, provincial, territorial, and international partners to minimize its health, economic, and social impacts in Canada and around the world. We have worked closely with Canada's trained public health and medical professionals to put in place the plans, infrastructure, and resources needed to protect the health and safety of all Canadians. The Prime Minister, Justin Trudeau, today outlined Canada's whole-of-government response to COVID-19, by establishing a more than $1 billion COVID-19 Response Fund. This comprehensive approach includes measures already underway to respond to the outbreak, as well as new investments to limit the spread of the virus in Canada and prepare for its possible broader impacts on our people, our economy, and our small businesses. In addition to continuing our work to ensure a coordinated response across the country, the Government of Canada is proposing new investments to respond in Canada and around the world. These investments will include actions to: Help Canadians make informed decisions and take action to protect their health and their communities by providing $50 million to support the Public Health Agency of Canada's COVID-19 communications and public education efforts.

Further support public health preparedness by providing $500 million to provinces and territories for critical health care system needs and to support mitigation efforts as needed. This could include help to support with access to testing, acquisition of equipment, and to enhance surveillance and monitoring. Financial considerations should not and will not be an obstacle to hospitals and health systems making the necessary preparations. Provide support to workers in quarantine or who have been directed to self-isolate who will claim Employment Insurance (EI) sickness benefits by waiving the mandatory one- week waiting period so they can be paid for the first week of their claim. We are exploring additional measures to support other affected Canadians, including income support for those who are not eligible for EI sickness benefits. Introduce enhancements to the Work-Sharing program to help support employers and their workers who are experiencing a downturn in business due to COVID-19. Work- sharing helps keep workers employed and able to receive income support even as their hours of work may be reduced. These enhancements will double the length of time that employers and workers are eligible to use work-share from 38 to 76 weeks, and streamline processes so help can be accessed as soon as possible. Support federal public health measures such as enhanced surveillance, increased testing at the National Microbiology Laboratory, and ongoing support for preparedness in First Nations and Inuit communities, by providing $100 million. This is in addition to an initial $50 million that was provided to support the immediate public health response. Enhance Canada's capacity in research and development, including research on medical countermeasures, including antivirals, vaccine development and support for clinical trials, by providing $275 million in additional funding building on top of the recent $27 million announcement to fund coronavirus research in Canada. Ensure adequate supplies of personal protective equipment like surgical masks, face shields, and isolation gowns by providing $50 million to the Public Health Agency of

Canada to support purchases for provinces and territories, as well as to address federal needs. Address the worldwide outbreak and help more vulnerable countries prepare for and respond to the virus by contributing an additional $50 million to support the efforts of the World Health Organization and other partners. To support businesses should the economy experience tightening credit conditions, the Government will act swiftly to stimulate the economy by strengthening investment in federal lending agencies such as the Business Development Bank of Canada and Export Development Canada. This partnership between Canada's financial Crown corporations and private sector financial institutions, in response to credit conditions during the 2008-2009 financial crisis, provided $11 billion of additional credit support to 10,000 firms. In addition, flexible arrangements could be made for businesses trying to meet payment obligations to the Canada Revenue Agency. Through these and other measures, the Government of Canada will continue to protect the health and safety of all Canadians, ensure economic resilience, and contribute to the international response to COVID-19. Bank of Canada's Response to COVID-19: "In the days and weeks since the COVID-19 pandemic came to Canada, the Bank of Canada has been taking action to ensure our economy and financial system are weathering the unprecedented shock of the shutdown. We have responded in two main ways. First, we have cut our key policy interest rate to 0.25 percent. Second, we have been buying bonds and other debts to help keep key funding markets functioning well. Together, these actions are designed to set the stage for a solid recovery when the restrictions of the pandemic are lifted. The shutdown is temporary, but the restraining of so much activity can have long-lasting effects if governments, businesses and households do not have access to funding to tide them over. We are helping to ensure that such access remains available throughout the crisis."

Questions: (Total 30 Marks)

1. Why is the COVID-19 pandemic so bad for the economy? (3 marks) 2. What is being done to help the economy? (3 marks) 3. The Canada Emergency Response Benefit (CERB) is the largest stimulus package in history. How does it work? And How this program would help Canadian economy? (3 marks) 4. Some critics of Canadian Government CERB program argue that because of generous spending by the Government, there will be harmful long-term effect on the Canadian economy. They argue that the national debt will increase significantly as the result of the current spending. Therefore, they call for modest spending instead. What do you think their position? (3 marks) 5. There are two types of government stabilization programs - fiscal and monetary. What is the difference? Who carries out these programs respectively? (3 marks) 6. CERB is projected to cost around $60 Billion. What are the downsides of this policy? Is it worth it? (3 marks) 7. Within fiscal policy, there are expansionary fiscal policy and contractionary policy. Which category does CERB belong to? How does it work in general? (3 marks) 8. Bank of Canada has reduced its overnight key policy interest rate twice amid the COVID-19 pandemic. The current rate is at 0.25%. Bank of Canada has changed its approach from targeting money supply to targeting interest rate since 1980s. Why is that? (3 marks) 9. Bank of Canada uses Open Market Operation to carry out its intended objectives. How does Open Market Operation work in the face of COVID-19 pandemic? In other words, what would Bank of Canada do to achieve its policy objective? (3 marks) 10. Some people think that the economy will rebound quickly once people are allowed to return to work and school. Do you agree or disagree? Why? (3 marks)