fiscal stimulus

(noun)

Involves government spending exceeding tax revenue, and is usually undertaken during recessions.

Related Terms

Examples of fiscal stimulus in the following topics:

  • Stability Through Fiscal Policy

    • This causes a lower aggregate demand for goods and services, contrary to the objective of a fiscal stimulus.
    • The Treasury View refers to the theoretical positions of classical economists in the British Treasury, who opposed Keynes' call in the 1930s for fiscal stimulus.
    • Austrians say that Fiscal Stimulus, such as investing in roads and bridges, does not create economic growth or recovery, pointing to the case that unemployment rates don't decrease because of fiscal stimulus spending, and that it only puts more debt burden on the economy.
    • In theory, fiscal stimulus does not cause inflation when it uses resources that would have otherwise been idle.
    • For instance, if a fiscal stimulus employs a worker who otherwise would have been unemployed, there is no inflationary effect; however, if the stimulus employs a worker who otherwise would have had a job, the stimulus is increasing labor demand, while labor supply remains fixed, leading to wage inflation and, therefore, price inflation.

  • Arguments For and Against Fighting Recession with Expansionary Fiscal Policy

    • Expansionary fiscal policies involve reducing taxes or increasing government expenditure.
    • Due to the funding process of expansionary policy, there is a lack of consensus among economists with respect to the merits of fiscal stimulus.
    • This may in turn reduce aggregate demand for goods and services, which defeats the purpose of a fiscal stimulus.
    • Fiscal stimulus is implemented with the view that tax relief through a reduction in tax rate and or direct government spending through investment (infrastructure, repair, construction) will provide stimulus to increase economic growth by directly influencing consumption or the government expenditure component of GDP .
    • Evaluate the pros and cons of fiscal policy intervention during recession

  • Long-Run Implications of Fiscal Policy

    • Economists still debate the effectiveness of fiscal policy to influence the economy, particularly when it comes to using expansionary fiscal policy to stimulate the economy.
    • This causes a lower aggregate demand for goods and services, contrary to the objective of a fiscal stimulus.
    • Other possible problems with fiscal stimulus include inflationary effects driven by increased demand.
    • Similarly, if stimulus capital is invested in creating jobs, the overall spending in a given economy will increase (that is, if jobs are actually created).
    • If a country pursues and expansionary fiscal policy, high inflation becomes a concern.

  • Fiscal Policy

    • Fiscal policy is the use of government revenue collection or taxation, and expenditure (spending) to influence the economy.
    • Neutral fiscal policy is usually undertaken when an economy is in equilibrium.
    • A fiscal deficit is often funded by issuing bonds.
    • However, economists debate the effectiveness of fiscal stimulus.
    • This causes a lower aggregate demand for goods and services, contrary to the objective of a fiscal stimulus.

  • Effect of a Government Budget Deficit on Investment and Equilibrium

    • As the economy grows more quickly, the budget deficit falls and the fiscal stimulus is slowly removed.
    • Unlike the cyclical budget deficit, a structural deficit is the result of discretionary, not automatic, fiscal policy.
    • While automatic stabilizers don't actually shift the aggregate demand curve (because transfer payments and taxes are already built into aggregate demand), discretionary fiscal policy can shift the aggregate demand curve.

  • Evaluating the Recent United States Stimulus Package

    • The American Recovery and Reinvestment Act of 2009 (ARRA), otherwise known as the Stimulus or The Recovery Act, was an economic stimulus package was signed into law on February 17, 2009.
    • The primary justification for the stimulus package was to minimize unemployment.
    • One year after the stimulus, several independent firms, including Moody's and IHS Global Insight, estimated that the stimulus saved or created 1.6 to 1.8 million jobs and forecast a total impact of 2.5 million jobs saved by the time the stimulus is completed.
    • Since the stimulus only is impactful when the money is actually spent, delays could have reduced the overall effectiveness of the stimulus.
    • Summarize the effects of the use of stimulus in the wake of the Great Recession

  • Income Security Policy

    • Fiscal policy is considered to be any change the government makes to the national budget in order to influence a nation's economy.
    • Any changes the government makes to the national budget in order to influence a nation's economy is considered fiscal policy.
    • This phenomenon set the standard and showed just how necessary it was for the government to play an active role in fiscal policy.
    • In an attempt to fix these economic problems, the United States federal government passed a series of costly economic stimulus and bailout packages.
    • Analyze the transformation of American fiscal policy in the years of the Great Depression and World War II

  • Recovery

    • The objective of economic recovery when in crisis is to stabilize the economy and recapture the value lost using economic stimulus strategies.
    • The objective of economic recovery when in crisis is to stabilize the economy, and from there recapture the value lost through economic stimulus strategies while addressing the factors which contributed to the collapse in the first place.
    • The stimulus package can be broken down via the attached figure in regards to monetary investment in specific places , totaling $831 billion (USD) between 2009 and 2019.
    • Instead, the government demonstrated that, as long as certain fiscal influence is achieved, these competitive rules are negligible.

  • Fiscal Policy and the Multiplier

    • Fiscal policy can have a multiplier effect on the economy.
    • The size of the multiplier effect depends upon the fiscal policy.
    • The size of the shift of the aggregate demand curve and the change in output depend on the type of fiscal policy.
    • The multiplier effect determines the extent to which fiscal policy shifts the aggregate demand curve and impacts output.
    • Describe the effects of the multiplier beyond its relevance to fiscal policy

  • Fiscal Policy and Policy Making

    • Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy.
    • The two main instruments of fiscal policy are government taxation and expenditure.
    • Neutral fiscal policy, usually undertaken when an economy is in equilibrium.
    • Borrowing: A fiscal deficit is often funded by issuing bonds, like treasury bills or consols and gilt-edged securities.
    • Comparison of National Spending Per Citizen for the 20 Largest Economies is an example of various fiscal policies.