"Trinidad and Tobago is not only impacted by the economic consequences of COVID-19; but as an oil-and-gas exporting country, the economic, financial and social consequences have been further compounded by the dramatic drop in oil and gas prices. The worldwide demand for crude oil has crashed in the context of stay-home-lockdown orders. As I indicated earlier, on April 20, 2020, the price of West Texas Intermediate (WTI) took an unprecedented turn entering negative territory for the first time in its history, The WTI June 2020 delivery for crude oil is currently US$15 per barrel and the natural gas June futures price is US$1.82 per MMBTU." "The Central Bank of Trinidad and Tobago is helping the economy navigate through these difficult circumstances. For example, the Central Bank has reduced the reserve requirements for the commercial banks from 17.0 percent to 14.0 percent; and the repo rate from 5.0 percent to 3.5 percent. As a result, Commercial banks have reduced their prime lending rates from an average of 9.5 percent to 7.5 percent; the narrowing spread between lending rates and deposit rates will surely bring about improved efficiency within the banking system." "Indeed, there was no doubt that those containment measures would have a most severe economic fallout on some of our major employment-creating sectors: tourism, hospitality, manufacturing, trade, distribution, construction, agriculture, personal and professional services and arts, entertainment and recreation. We have responded quickly with a broad set of policy measures aimed at providing social protection, assisting the poor and vulnerable, protecting businesses, jobs and incomes, maintaining financial resilience and sustaining economic activity." From the above answer the following questions: I. c. Using the Keynesian Transmission Mechanism or the Monetary Transmission Mechanism, clearly explain and graphically illustrate the impact of the stimulus measures on aggregate demand. II. d. Discuss two fiscal policy tools that the Government can used to achieve similar results of that of the Central Bank.
"Trinidad and Tobago is not only impacted by the economic consequences of COVID-19; but as an oil-and-gas exporting country, the economic, financial and social consequences have been further compounded by the dramatic drop in oil and gas prices. The worldwide demand for crude oil has crashed in the context of stay-home-lockdown orders. As I indicated earlier, on April 20, 2020, the price of West Texas Intermediate (WTI) took an unprecedented turn entering negative territory for the first time in its history, The WTI June 2020 delivery for crude oil is currently US$15 per barrel and the natural gas June futures price is US$1.82 per MMBTU." "The Central Bank of Trinidad and Tobago is helping the economy navigate through these difficult circumstances. For example, the Central Bank has reduced the reserve requirements for the commercial banks from 17.0 percent to 14.0 percent; and the repo rate from 5.0 percent to 3.5 percent. As a result, Commercial banks have reduced their prime lending rates from an average of 9.5 percent to 7.5 percent; the narrowing spread between lending rates and deposit rates will surely bring about improved efficiency within the banking system." "Indeed, there was no doubt that those containment measures would have a most severe economic fallout on some of our major employment-creating sectors: tourism, hospitality, manufacturing, trade, distribution, construction, agriculture, personal and professional services and arts, entertainment and recreation. We have responded quickly with a broad set of policy measures aimed at providing social protection, assisting the poor and vulnerable, protecting businesses, jobs and incomes, maintaining financial resilience and sustaining economic activity." From the above answer the following questions: I. c. Using the Keynesian Transmission Mechanism or the Monetary Transmission Mechanism, clearly explain and graphically illustrate the impact of the stimulus measures on aggregate demand. II. d. Discuss two fiscal policy tools that the Government can used to achieve similar results of that of the Central Bank.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:"Trinidad and Tobago is not only impacted by the economic consequences of COVID-19; but
as an oil-and-gas exporting country, the economic, financial and social consequences have
been further compounded by the dramatic drop in oil and gas prices. The worldwide demand
for crude oil has crashed in the context of stay-home-lockdown orders. As I indicated earlier,
on April 20, 2020, the price of West Texas Intermediate (WTI) took an unprecedented turn
entering negative territory for the first time in its history, The WTI June 2020 delivery for crude
oil is currently US$15 per barrel and the natural gas June futures price is US$1.82 per
MMBTU."
"The Central Bank of Trinidad and Tobago is helping the economy navigate through these
difficult circumstances. For example, the Central Bank has reduced the reserve requirements
for the commercial banks from 17.0 percent to 14.0 percent; and the repo rate from 5.0 percent
to 3.5 percent. As a result, Commercial banks have reduced their prime lending rates from an
average of 9.5 percent to 7.5 percent; the narrowing spread between lending rates and deposit
rates will surely bring about improved efficiency within the banking system."
"Indeed, there was no doubt that those containment measures would have a most severe
economic fallout on some of our major employment-creating sectors: tourism, hospitality,
manufacturing, trade, distribution, construction, agriculture, personal and professional
services and arts, entertainment and recreation. We have responded quickly with a broad set
of policy measures aimed at providing social protection, assisting the poor and vulnerable,
protecting businesses, jobs and incomes, maintaining financial resilience and sustaining
economic activity."
From the above answer the following questions:
I.
c. Using the Keynesian Transmission Mechanism or the Monetary Transmission
Mechanism, clearly explain and graphically illustrate the impact of the stimulus
measures on aggregate demand.
I.
d. Discuss two fiscal policy tools that the Government can used to achieve similar
results of that of the Central Bank.
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