With all the buzz about the state of the economy and the stimulus package, most wonder, what does all this means or what’s in it for us or would it really matter as much?
What the government is implementing now is an example of a fiscal policy ( remember ECO 101?) here; it is expected that an increase in government spending ($825B ) would boast the economy in the form of loans to industries with would help them produce even more, in the process create jobs and then a government stipend to the consumers with encouragement to spend more.
And how does one relate to the other? If industries have no money to fund project, produce or research it has to cut its cost – option one – lay off workers what in turn run out of cash to spend. Of course industries don’t just run out of fund, most times, it is because consumers (which could range from you, to government agencies) are not buying enough of what is being produced.
To illustrate: suppose a bus driver gets laid off because his company cannot afford to gas up his route, one less driver buys coffee from the starbucks on his route. Now imagine even more drivers on this route get laid off, sooner or later, the starbucks losses most of its primary customer (bus drivers) and now has to fold up thereby displacing Starbucks workers. Now, laid off from starbucks workers cannot afford to go to Uncle Joe’s Diner; at some point, Uncle Joe goes out of business, and so on.
In this case, what the stimulus does is help out the Bus company with funding, making it possible to afford more routes, more drivers will be needed, the route now becomes a choice area to have a coffee shop and with time everyone is back in business.
As you might have noticed, recovery from an economic distress takes time, and patience. Apart from the time, spent convincing the congress that it’s a good idea, so disbursing the fund to when the effects starts becoming effectual – don’t loose hope.
At least now you know how it works and can glad say – it looks better, it’s probably a good idea afterall.
Related posts:
- the Bible on Economic Reward Some stories in the Bible would stump any thinking person...
- hitting the Shanghai route Wow, everything seems blocked here — Facebook, MySpace, Youtube, Twitter,...