The Economics of the 2020 Stimulus Packages

A worker cleans an empty hall in Industry City, N.Y., where the shops have been closed due to the coronavirus outbreak, March 26, 2020. (Stephen Yang/Reuters)
When money pours into an economy where output is constrained, what happens?

NRPLUS MEMBER ARTICLE I t is not uncommon to look to fiscal and monetary intervention to offset the fall-off in demand in economies undergoing severe economic contraction. Even today, there is some lingering dispute about whether such actions really do much good. Generally, fiscal and monetary stimuli are thought to have little impact on price levels in the early stages of an economic recovery, as output and employment gradually begin to recover. This consensus among economists is currently being applied to the stimulus packages designed to offset an economic collapse in the U.S. and Western Europe, occasioned by mandated shutdowns of their economies, related

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