Chapter 20, Problem 2CYU

To determine

The reason why federal disaster relief, will stabilize the economy more effectively after a disaster than relief that must be legislated.

Explanation of Solution

Federal disaster relief would stabilize the economy because it will take less time to distribute money in the economy to prevent people from the loss such as losses due to large-scale crop failures.

Moreover, it would be easier to equally distribute funds through natural disaster funds as compared to through the government because legislation consumes a lot of time and legal formalities that affect the efficiency of fund distribution. This relief would offer food, healthcare, shelter, etc. to people that are disrupted due to natural disasters so that the economy would stabilize as soon as possible.

In addition, federal disaster relief also responds quickly to negative supply shock or negative demand shock in the economy, and disasters in the country cause these shocks, therefore, it prevents the economy quickly from these kinds of negative shocks.

Economics Concept Introduction

Introduction: When a program is initiated which offers tax relief due to the destruction or damage to the property from any sudden or unexpected event such as a hurricane, fire, or earthquake then this program is called federal disaster relief.