What Is a Stimulus Package? A Conversation with Professor Megan Way

What Is a Stimulus Package?
Listen

During this tumultuous year, you’ve likely read about it or heard it on the news. But, what exactly is a stimulus package?

Well, one was approved in the spring, and a second is in the works. Associate Professor and Chair of the Economics Division Megan Way discusses the factors that drive these proposals, the expectations of recipients, and the effects they can have on entrepreneurship.

What is a stimulus package, and how is it decided that one is needed?

“A stimulus package is an attempt to use government spending to make up for the fact that people have stopped spending. It’s supposed to drive consumers and businesses to get the economy moving. If the economy goes into a recession, that’s the trigger. You rarely hear about a stimulus package when there isn’t a documented recession in play.”

Are recipients expected to put their new funds back into the economy?

“That’s the tricky point. You’re hoping whoever you give the money to is going to spend it, and not use it to reduce their own debt. That’s why oftentimes economists will push for targeting stimulus to individuals and firms that are more likely to spend. Stimulus can also prompt investment, if government funds are targeted to incentivize businesses to grow.”

What situation would we be in if not for the distribution of a stimulus package(s)?

“We would have a much more prolonged recession or depression. The extended unemployment benefits and increased unemployment payments have supported consumer spending enormously during this time. It’s boosted the economy significantly. If we feel things are slightly stable right now, that is only because of these packages.”


“When there’s funding for the availability of protective gear, plenty of entrepreneurial leaders can kick into action and pivot their businesses.”
Megan Way, Associate Professor and Chair of the Economics Division

How is it determined that a second stimulus package may be needed in a span of just a few months?

“They look at unemployment rates, and predictions about Gross Domestic Product. The official designation of a recession is two consecutive quarters of a decline in GDP. There are a lot of people and businesses that are going to be in grave situations if we don’t have a second stimulus package.”

How important is this assistance to small businesses and/or startups?

“The payroll protection program for example, that we had with the first stimulus package, allowed many small businesses to survive. At a time where everyone was supposed to be staying home, small businesses were vulnerable to going out of business. Oftentimes, they don’t have the same access to credit that larger businesses have. That’s key for entrepreneurs.”

Can stimulus packages spark entrepreneurship and innovation?

“They definitely support it, providing low-interest loans, low-collateral loans. They can also work more directly, if funding is targeted to a specific sector. For example, when there’s funding for the availability of protective gear, plenty of entrepreneurial leaders can kick into action and pivot their businesses.”

Posted in Insights

More from Insights »

Latest Stories

a row of electricity meters
The Price of Power: What’s Driving Rising Electricity Rates? Electricity rates have been steadily increasing. Ryan Davies, a Babson professor of finance, unpacks the many reasons for that, including the massive data centers popping up across the country.
By
John Crawford
Senior Journalist
John Crawford
A writer for Babson Thought & Action and the Babson Magazine, John Crawford has been telling the College’s entrepreneurial story for more than 15 years. Assignments for Babson have taken him from Rwanda to El Salvador, from the sweet-smelling factory of a Pennsylvania candy maker, to the stately Atlanta headquarters of an NFL owner, to the bustling office of a New York City fashion designer. Beyond his work for Babson, he has written articles and essays for The Philadelphia Inquirer, Notre Dame Magazine, The Good Men Project, and other publications. He can be found on Twitter, @crawfordwriter, where he tweets about climate change.
September 30, 2025

Posted in Insights

The Babson community and mascot celebrate at the Roger Babson statue last year
No. 2 Again: Wall Street Journal Ranks Babson the No. 2 Best College for the Second Year in a Row For the second year in a row, The Wall Street Journal ranked Babson as the No. 2 Best College in the United States, lauding the College for its impressive student outcomes.
By
Eric Beato
Editor / Writer
Eric Beato
Eric Beato is the Editor of Babson Thought & Action and Babson Magazine. A native of Chicago and a graduate of the University of Missouri School of Journalism, Eric has worked as an editor and writer at newspapers across the country, including the Chicago Sun-Times and Boston Herald. Eric joined Babson College in 2019 after working as the communications director for a private educational travel company and as the managing editor of six regional sports publications.
September 29, 2025

Posted in Community, Entrepreneurial Leadership, Insights, Outcomes

First row (left to right): Laura Bautista ’29, Ezel Bhatty ’29, Sydney Fojas ’29; Second row (left to right): Lucas Lebrija ’29, Tia Malhotra ’29, Remy Witt ’29
Class of 2029 Blank Leadership Scholars Bring Excitement to Campus The Class of 2029 Blank Leadership Scholars arrive at Babson equipped with entrepreneurial spirit and social impact experience, from launching nonprofits and tech solutions to championing environmental education.
By
Melissa Savignano
Writer
Melissa Savignano
Melissa Savignano, a content marketing manager at Babson College, has worked in higher education for almost a decade, where she tells authentic, compelling campus and community stories. Before Babson, she managed communications for Boston University’s largest college, the College and Graduate School of Arts & Sciences. She previously worked in client relations, helping brands of various sizes launch content marketing strategies and storytelling initiatives. When not at work, you will find her in the city of Boston, probably at the movie theater.
September 25, 2025

Posted in Community