Assignment: 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.
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 toencourage 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