Question

The 90 days have now passed, and it is obvious to many policymakers that a recession exists because consumers are spending less. As a result of these data, the government passes a law that creates an office that will give everyone $3,000 they must spend. This office will take 9 months to create and for hiring the necessary personnel. How would the economy change in this second time period, where the data now have convinced all the policymakers that a recession exists and where the government passed a law to start expansionary fiscal policies, but the money hasn't been distributed yet

Answer 1

Answer:

In this second time period, people would have more positive expectations about their personal economy, and the overall economy, because they would expect the stimulus check of $3,000 to reach their accounts very soon.

This would make people a bit less cautious with their spending, despite the economic recession. Some people would even use a larger proportion of their regular salary to either pay outstanding debt, or to acquire more expensive consumer goods or assets, because they would set aside the $3,000 for daily expenses.