Answer to Question #133804 in Economics for Jason Max

Question

(a) The impact of COVID-19 has sent the economy of Hypothetica into recession. The finance ministry has advised the government to ensure a weaker currency in order to boost exports and thus kickstart the slowing economy. As well, the finance ministry wants the government to also cut income taxes and introduce a special income supplement of $100 a month to every citizen as this will also boost the economy. The President of Hypothetica has asked you, as her chief economic advisor, for your views. In particular, she wishes to know the following:
(i) Would a weaker currency really increase net exports? Your advise on this is
(ii) What would be the potential downside of cutting income taxes and providing citizens with an income supplement, with respect to government finances, and is that going to negatively impact on future economic growth? Your advise on this is

Answer 1

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