Stimulus Package : The New Deal

2971 Words12 Pages
When a country is suffering from an economic recession its leaders often struggle to get its citizens to make more money. So the government will try to improve the economy by any means it can. Some countries will try to do this by using stimulus packages. The theory behind the stimulus package is, if the government pays its citizens money for doing menial labor the ones paid will start to spend more and more money. The people who in turn receive the money will spend even more and eventually the money will come back to the government in the form of taxes. One of the most famous set of stimulus packages, known as the New Deal (enacted by President Franklin Roosevelt), was thought to have led the U.S. out of one of the worst economic…show more content…
Governments all over the world use stimulus packages. The people that have devised stimulus packages that we have used and the ones use today all had one idea in common, to make more people spend more money. The basic theory behind stimulus packages shows the futility of spending money to make others spend money.
The main theory of the stimulus is if the government pays you $20,000 to do an unimportant job you will spend that $20,000. Then the person or company you paid will then spend even more money somewhere else. The main problem with this is that the person the government paid might not spend the money in the first place. The second problem to arise would be that theorists claim that the growth of the original money spent would be exponential. Meaning that if the original person spent the $20,000 then the person that received the payment would in turn spend even more money to another person and that person would then pay even more money to someone else and so on. Another problem with the theory was that it did not explain where the government would then get the money for the original amount spent. So in other words when countries that are in debt try to create stimulus packages they are paying people to spend money on the off chance that every one that comes into contact with that money will not only spend it, but will also spend even more until something happens. But what would that be, the
Open Document