Reference no: EM132548701

Assuming the government is selling a government bond to fight COVID-19, and at the same time, ASHANTI Goldfields Company is selling a corporate bond to increase its production. Under what conditions will the production-linked corporate bond be oversubscribed at the expense of the government bond. Explore all possible scenarios.

The President of Ghana launched the COVID-19 business alleviation program in collaboration with the National Board for Small Scale Industries (NBSSI), Trade Associations, and some selected banks. Under the program, the government is giving funds without interest to selected financial institutions for onward lending to businesses at a 3% interest. The program is aimed at helping beneficiaries to sustain their businesses during the Covid-19 pandemic. Use this information to answer the following questions.

a. Explain the monetary policy tool being used by the government under this program.

b. If the government had pegged the interest rate under the program at the monetary policy rate, will this have been a better way of setting the rate? Explain the advantages and disadvantages of each scenario.

c. Explain the expected impact of the low-interest rate program on gross domestic product (GDP), articulating the possible pathways.