The turbulence of the current economic times have in the recent past plunged some economies into deep recessions. In response to this, governments have come up with economic stimulus packages in a bid to boost their economic growth and salvage their economies from the economic slump. There are two main ways through which this is achieved: it includes the implantation of the expansionary fiscal policy and the expansionary monetary policy (Jasson, 2005; Ferran et al., 2012).
The expansionary fiscal plans basically involve the introduction of changes in the spending and/or taxation with the aim of influencing the aggregate demand: tax cuts in terms of income taxes for instance boost that disposable income of individuals, prompting them to spend more. Besides, boosting the expenditure of the government injects money into the economy and this translates into increased aggregate demand. On the other hand, monetary policy involves the cutting down of interest rates in the aim of increasing consumer expenditure and investment. Through low rate, the cost of borrowing is reduced; mortgage interest rates are also reduced and this does not just boost the levels of disposable income amongst the people; it also reduces the incentive to save (Ferran et al., 2012). This paper will attempt to explore how private corporations, commercial banks and wealthy individuals can frustrate or even impede these combined fiscal and monetary stimulus programs. .
The very fact that a government resorts to employing an economic stimulus package sends a message to the private corporations that the economy is not ripe for investment. These corporations will therefore be less eager to invest in such an economic environment (Jasson, 2005). When these corporations fails to do so, the government fail to jump start the failing economy as there are no more jobs being created to cushion individuals from the harsh economic times.