Fiscal stimulus.

In plain English

Fiscal stimulus works by putting money into the hands of households, businesses, or state governments so they spend it, which raises total demand and, in theory, output and hiring. It comes in several forms: direct payments, expanded benefits, infrastructure projects, and temporary tax cuts. The size of the effect depends on how much of each dollar gets spent rather than saved or used to pay down debt, which is why transfers aimed at lower-income households tend to circulate faster. Timing is the hard part, because legislation and construction both take time and money can arrive after the downturn ends. Stimulus adds to the deficit in the year it happens.

01Why it matters

Stimulus decides whether a recession means a lost job with no cushion or a lost job with extended benefits, and it also adds to the borrowing that future budgets have to service.

02The math, step by step

Say the government sends $1,000 to 50 million households, or $50 billion. If households spend 70 cents of each dollar and the businesses receiving it do the same, the first two rounds alone add about $35 billion plus $24.5 billion of demand, roughly $59.5 billion.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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