In my last post I explained that an unhealthy economy essentially means that for whatever reason there is not enough money circulating around; either people do not have the money or they are not spending it. In this two-part post I want to examine the two most common responses governments and central banks have to the problem of an unhealthy economy, stimulus and austerity.
Stimulus is pretty straightforward and really only has one purpose, to get the economy moving again. Each stimulus package is different but the general idea behind them all is to inject more cash into the economy. Remember that an unhealthy economy is one with too little cash in circulation. When a patient is low on blood they are given extra in the form of a blood transfusion; a stimulus is a cash transfusion and the patient is the national economy. Scholarships and small business loans are … Read More