How does an economic stimulus package work?

An economic stimulus package is often times an initiative made by the government to inject money into businesses and the people in order to jump start their economy coming from a terrible fiscal year. According to Steven Fisackerly, its primary function is to reverse the effects of a recession by boosting spending on local goods and services, as well as creating jobs. This may all sound good and well, but how does this work and how is it carried out?

An economic stimulus package often comes in two waves for it to become successful. The first wave is to inject money into businesses to make sure that they do not go under. This is money for the companies to keep them from laying off people because people who are jobless tend to spend less, which in turn affects sales-related businesses as well. Steven Fisackerly believes that this stimulus package can come in the form of tax breaks or lowered tax interest rates, as well as direct funding. Last March, the US senate has approved a stimulus package of $2 trillion under the Cares Act in order to fight the economic damage created by the pandemic.

The second wave for a successful stimulus package is injecting money to the consumers. Having money to spend, the government will invest on people to spend on local businesses, thus jumpstarting the economy once again. The money can come from several sources such as tax rebates, unemployment benefits, free medical assistance or insurance, and discretionary spending. According to Steven Fisackerly, the second wave is often made after the first wave. But as part of the government’s ongoing effort to fight the pandemic and the economic drought that it has caused, some portions of second wave is being released in the form of the additional cash people are receiving on top of their unemployment benefit.