Why may the government implement stimulus measures during an economic downturn?

During an economic downturn, the government may implement stimulus measures primarily to stabilize the economy and boost growth. Economic downturns are often characterized by reduced consumer and business spending, increased unemployment, and overall economic contraction. In such scenarios, stimulus measures—such as increased government spending, tax cuts, or direct financial assistance to individuals—are designed to inject money into the economy.

By stimulating demand for goods and services, these measures can help to encourage consumer spending and investment, which in turn can lead to job creation and a revitalization of economic activity. The goal is to counteract the negative effects of the downturn, restore confidence among consumers and businesses, and promote a more robust economic recovery.

Stimulus measures can also create a multiplier effect, where initial spending leads to additional economic activity, reinforcing the overall impact on growth. This approach is rooted in Keynesian economic theory, which posits that during times of low demand, government intervention can play a critical role in boosting economic performance and achieving full employment.