Overview
Fiscal stimulus is a crucial tool used by governments to boost economic activity, especially during downturns. By increasing spending or cutting taxes, governments aim to enhance aggregate demand, leading to job creation and economic growth. Understanding the mechanisms and effects of fiscal stimulu...
Key Terms
Example: Increasing spending during a recession.
Example: Higher consumer spending increases aggregate demand.
Example: A $1 million investment can lead to a $2 million increase in GDP.
Example: The economy contracted for two consecutive quarters.
Example: A 10% tax cut increases disposable income.
Example: The U.S. government issued a stimulus package during the COVID-19 pandemic.
Related Topics
Monetary Policy
The process by which a central bank manages money supply and interest rates.
intermediateEconomic Recession
A significant decline in economic activity across the economy lasting more than a few months.
intermediateInflation Control
Strategies used to manage and control inflation rates in an economy.
advancedKey Concepts
government spendingtax cutseconomic growthaggregate demand