COVID-19 Virus Impact on the Economy Multiplier in Canada

Subject: Economics
Pages: 2
Words: 334
Reading time:
2 min

The term multiplier in the economy, in a broad sense, means a particular economic variable that, when changed, causes changes in other economic factors. At the same time, such a change can be multiple; for example, doubling of the multiplier may triple other factors. In general, this term is used to describe the relationship between government expenditures and total national income. Under normal conditions, public spendings are aimed at increasing the positive indicators of the national economy.

The Canadian Government’s response, in this case, is extraordinary and is directly aimed at supporting citizens and businesses in a situation of a pandemic. According to the Canadian Department of Finance report, the state will financially support all workers who become sick with COVID-19. It will also support workers who have to stay home to take care of “family member who is sick with COVID-19” or “children who require care or supervision due to school or daycare closures”.

The Canadian Government has also provided several subsidies, tax breaks, and credit holidays for businesses. The main objective of this 27-billion-dollar aid program is to “minimize the disruption to the country’s economy”. The lack of this support could have far more damaging social and economic consequences, especially for the disadvantaged population and small businesses. Thus, these measures are preventive and are aimed not at stimulating economic growth but at mitigating possible crisis outcomes.

Accordingly, these government expenditures will relate to total national income in a different way. The funds that Canada will spend on financial assistance will not increase total national income, much less multiple it. At the same time, this aid will prevent the loss of a large part of total national income in the future due to potential health care costs and the overall economic downturn. It should be pointed out that these expenditures of the Canadian Government, despite the absence of a direct positive correlation with the income increase, have long-term benefits.