Stimulus
Discuss the long-range effects of a stimulus plan as it affects the banking sector, on the one hand, and increases aggregate demand, on the other hand.
A stimulus plan by the federal government is designed to increase aggregate demand and boost economic production, lifting the nation out of a recession. By infusing money into the economy through public works projects and other government investments, newly hired workers have more income, and can thus contribute to the expansion of the economy as a whole through their spending. However, a long-range stimulus plan can occasionally make the banking sector nervous, because of fears of rising inflation. Inflation is feared by the banking sector because this reduces the value of their current holdings, and also means that current loans will yield a less profitable dividend, as prices increase and the purchasing power of the...
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