A stimulus is a package of economic measures put together by a Govt. to stimulate a floundering economy. The objective of a stimulus package is to reinvigorate the economy and prevent or reverse a recession by boosting employment and spending.
Types of Stimulus
- Monetary Stimulus
- Fiscal Stimulus
- Quantitative Easing
The monetary stimulus consists of cutting interest rate where fiscal stimulus has a cutting taxes or increased spending. Quantitative easing is an expansionary monetary policy in which the country's central bank purchases a large number of financial assets such as bonds from commercial banks and other financial institutions.