(When my mom – ex middle school science & economics teacher – asks about monetary and fiscal stimulus)
When does an economy grow?
At a simple level, when earning/spending increases.
People and companies spend more when they have more money.
They get more money from increased borrowing, or increased income.
The government, when confronting low inflation and low growth, wants to increase this spending.
It has two sets of tools – monetary and fiscal – to stimulate this growth.
Monetary tools target increased lending/borrowing, and fiscal tools intend to increase income directly.
Continue reading Mom asks: What’s monetary and fiscal stimulus?