From the course: Economics for Everyone: Understanding a Recession
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The three ingredients of economic recovery
From the course: Economics for Everyone: Understanding a Recession
The three ingredients of economic recovery
- Every recession is a little bit different, but every economic recovery has three fundamental things required. The first is fiscal policy. Governments spend money, and usually a lot more money in a downturn, to help stimulate economic growth and get an economy growing again. Sometimes this involves deficit spending and spending money the government doesn't have. But during a downturn the priority isn't necessarily to worry about the government's balance sheet, the priority is to get the economy growing again. The second ingredient of economic growth in a recovery is monetary policy. Monetary policy is what central banks do. Usually it means cutting interest rates, making money cheaper so that businesses are more incentivized to invest, and individuals are incentivized to go out and buy stuff they might finance like cars, or appliances, maybe even a new house. And the third ingredient of economic recovery is time,…
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