Stimulus

Posted in Finance, Accounting and Economics Terms, Total Reads: 646
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Definition: Stimulus

Economic stimulus is the use of monetary or fiscal policy changes to kick start a lagging or struggling economy or to give a sudden forceful jolt to the economy for controlling it. It means attempts are made by government or government bodies or government agencies to financially stimulate the economy. In this, government uses the tactics of lowering or increasing the interest rates, by increasing government spending and quantitative easing.

 

Economic Stimulus can also be defined as the process of making the plan to boost the economy and achieving the positive effects like increased job creation (reduction of unemployment), jumpstart frozen credit markets, restore consumer spending etc. through the use of monetary or fiscal policy.


In situation of Stimulus, Federal government programs designed to counteract weak economic activity to control the market with stimulus in form of government spending on infrastructure, tax breaks, and subsidies.


Central bank of the country stimulates the economy with loose monetary policy, which drives down interest rates to encourage businesses and consumers to borrow and spend.


Example:

Stimulus was seen in the late 2000s, when the governments around the world enacted aggressive fiscal and monetary stimulus plans to counteract the recession and financial crisis.


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