Introduction to stimulus package
A stimulus package is introduced by the government to stimulate a floundering economy. The main objective of a stimulus package is to improve the economy and make sure that there is no recession by ensuring an increase in employment and spending.
The idea behind the application of a stimulus package comes from Keynesian economics, which claims that recessions cannot automatically get fixed and that only government intervention can decrease it.
Understanding Stimulus Package
- When a government predicts an economic recession, it can establish a coordinated effort in the form of a stimulus to reduce the impact of the recession or even stave it off ultimately.
- The steps are carried out to take advantage of the impactful multiplier effects and ultimately enhance the consumption in the private sector and stimulate investment spending.
- The economic stimulus package will include the use of either monetary policy, fiscal policy, or both.
Key Elements
- A stimulus package is meant to boost government spending—and lower taxes as well as interest rates—to stimulate an economy.
