Fiscal Policy And Monetary Policy

Finding Economics Assignment 5, fiscal policy and monetary policy.

For this assignment, you will

  • Present a chart showing the growth of GDP of an economy.
  • Highlight a period of recession.
  • Discuss the policies implemented by the government/ Central Bank to revive the economy.

 

Hong Kong quarterly real GDP growth (1992 – 2017)

 

 

Fiscal policy is the primary tool the government can rely on to steer the economy out of recession in late 2000’s. Hong Kong government introduced a 110 billion HKD fiscal stimulus package in response to the global financial crisis. This includes

  • Special loans to small and medium enterprises (SMEs) so that the companies can start investment projects. (I increases).
  • Launching more construction projects, which also boosted the demand for labor (G increases).
  • One-off income tax cut to encourage consumption. (C increases)

It is not easy for the Central Bank to increase money supply to revive the economy, because the economy has a fixed exchange rate with the USD. By increasing the money supply, the value of HKD can drop which will violate the fixed exchange rate regime.

https://themarketmogul.com/hong-kong-japan-respond-recent-economic-crisis/

https://www.ceicdata.com/en/indicator/hong-kong/real-gdp-growth

 

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