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Macroeconomics: How should the government react to 50% of the population being wiped out?

Economics Dec 14, 2020

Macroeconomics: How should the government react to 50% of the population being wiped out?

Expert Solution

There is two way to see the impact of wipeout of 50% of the population. First is the loss of half the workforce, which includes both consumer and producer. Second is that it will save half of the population from starvation because of limited resources.

The government should react in the following way:

There might be an excess of resources such as vacant homes or industries are available. The government may utilize these resources by changing its immigration policies. And may enhance the quality of technology and other systems that attract foreigners for further production and consumption. By increasing government expenditure on schemes related to infrastructure, the government may utilize the vacant infrastructures.

In a matter of market shock to demand and supply government cannot do much by using fiscal and monetary policies because half of the producers and consumers never coming back. The government may overcome this situation by changing the interest rate and taxes that may help consumers in the expansion of their businesses.

The government may try to stabilize the banking system because half of the consumer loans never to be repaid.

The government may focus on stabilizing international trade of goods and services by lowering import duties which help to build the domestic market.

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