economic stimulus is action by the government to encourage private sector economic activity to stimulate the economy the government adopts targeted expansionary policies 
economic stimulus in the united states may be related to monetary policy carried out by the federal reserve other forms of economic stimulus are driven by fiscal policy with lawmakers directing tax policies and government spending toward areas that they believe will jump start the economy policy tools for implementing economic stimulus include lowering interest rates increasing government spending and the purchase of assets by the central bank in a process known as quantitative easing it is common for the government to adopt stimulus policies during times of recession but economic stimulus may also be used to provide an additional boost during periods of economic strength although the long term benefits of such policies remain a subject of debate the programs put in place to bolster the economy can have a big impact on financial markets and investors this makes it important to be aware of the mechanisms of economic stimulus as well as the associated benefits and risks 