Stimulus (economics)

In economics, stimulus refers to attempts to use monetary or fiscal policy (or stabilization policy in general) to stimulate the economy. Stimulus can also refer to monetary policies like lowering interest rates and quantitative easing.

Often the underlying assumption is that, due to a recession, production and hence also employment are far below their sustainable potential (see NAIRU) due to lack of demand. It is hoped that this will be corrected by increasing demand and that any adverse side effects from stimulus will be mild.