Question 3

Covid-19 pandemic, many governments including Organization Economic Cooperation and

Development (OECD) economies, have introduced massive fiscal and monetary packages for

contagion containment, relief, and recovery. The International Monetary Fund (IMF) projected

new borrowing by all governments to rise from 3.7% of global in 2019 to 9.9% in 2020.

a) Briefly discuss THREE (3) objectives of fiscal policy and monetary policies. (6 Marks)

b) Explain the effect of expansionary fiscal policy on:

1. Consumption.
2. Investment.
3. Aggregate demand. (6 Marks)

c) What is the distinction between automatic and discretionary fiscal policy? (4 Marks)

d) Explain THREE (3) lags of fiscal policy. (9 Marks)