Economic Slowdown

DEFINITION OF 'STIMULUS PACKAGE'
A package of economic measures put together by the government 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. The theory behind the usefulness of a stimulus package is rooted in Keynesian economics, which argues that the impact of a recession can be lessened with increased government spending.

INVESTOPEDIA EXPLAINS 'STIMULUS PACKAGE'
The global recession of 2008-2009 led to unprecedented stimulus packages being unveiled by governments around the world. In the United States, the $787-billion stimulus package dubbed the American Recovery and Reinvestment Act of 2009 contained a huge array of tax breaks and spending projects aimed at vigorous job creation and a swift revival of the U.S. economy.

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.[1]
Often the underlying assumption is that due to a recession the production and hence also the employmentare far below their sustainable potential (see NAIRU) due to lack of demand. It is hoped that this will be corrected by the increasing demand and that any adverse side effects from stimulus will be mild.
Fiscal stimulus refers to increasing government consumption or transfers or lowering taxes. Effectively this means increasing the rate of growth of public debt except that particularly Keynesians often assume that the stimulus will cause sufficient economic growth to fills that gap partially or completely. Seemultiplier (economics).
Monetary stimulus refers to lowering interest rates, quantitative easing, or other ways of increasing the amount of money or credit.
For example, Milton Friedman argued that the Great depression was caused by the fact that Fed did not...