What is a Stimulus Check?
A stimulus check is for the taxpaying consumers by a government. It boosts the economy by providing consumers with funds to spend. Consumer spending is an essential component of a healthy economy and in times of economic uncertainty, it usually decreases. Therefore, the government will provide this to keep the consumer outlook strong and encourage spending. Generally, it is a form of fiscal policy, which means it is a policy of the government to try and influence the economic conditions of a country.
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Effects of Stimulus Checks
A stimulus check is also a form of decreasing taxes. The government can lower taxes to boost consumption and saving among businesses and consumers. In a recession, it can encourage businesses and individuals to invest or spend more with their higher disposable income. Moreover, with higher consumption, demand will increase and, in turn, businesses will employ more workers. With higher demand for labour, wages will increase, which, in turn, boosts consumption in a virtuous cycle.