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Investments glossary

Economic Stimulus

Economic stimulus is action by the government to encourage private sector economic activity by engaging in targeted, expansionary monetary or fiscal policy based on the ideas of Keynesian economics. The term economic stimulus is based on an analogy to the biological process of stimulus and response, with the intention of using government policy as a stimulus to elicit a response from the private sector economy. Economic stimulus is commonly employed during times of recession. Policy tools often used to implement economic stimulus include lowering interest rates, increasing government spending, and quantitative easing, to name a few.

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