American Recovery and Reinvestment Act

Definition

The American Recovery and Reinvestment Act (ARRA) was a stimulus package enacted in 2009 aimed at promoting economic recovery following the Great Recession. This act provided significant funding for various sectors, including infrastructure, education, healthcare, and energy, while also expanding tax credits, including those for research and development, to incentivize innovation and job creation.

5 Must Know Facts For Your Next Test

1. The ARRA allocated approximately $831 billion to various projects and tax incentives designed to boost the economy and create jobs.
2. One of the key components of the ARRA was the expansion of the Research and Development (R&D) tax credits, making it easier for businesses to invest in innovation.
3. The act emphasized transparency and accountability, requiring recipients of funding to report on how they used the money.
4. Infrastructure projects funded by ARRA included roads, bridges, and public transportation systems, aimed at enhancing long-term economic productivity.
5. The act played a crucial role in stabilizing the economy and reducing the unemployment rate during the recovery phase following the recession.

Review Questions

• How did the American Recovery and Reinvestment Act impact research and development tax credits for businesses?
  • The American Recovery and Reinvestment Act significantly expanded R&D tax credits, making them more accessible for businesses. This was done to encourage firms to invest more in innovation during a time of economic downturn. By increasing the potential tax benefits for companies engaged in R&D activities, the ARRA aimed to stimulate job creation and technological advancement, which are vital for long-term economic recovery.
• Evaluate the effectiveness of the American Recovery and Reinvestment Act in achieving its goals related to economic recovery and job creation.
  • The effectiveness of the ARRA can be evaluated through various indicators such as GDP growth, job creation rates, and investments in infrastructure. While critics argue that the recovery was slow, proponents highlight that ARRA helped save or create millions of jobs and facilitated significant infrastructure projects. The infusion of funds into R&D tax credits also led to increased private sector investment in innovation, which is essential for sustainable economic growth.
• Synthesize information from multiple sources to assess how the American Recovery and Reinvestment Act has influenced long-term business strategies regarding R&D investments.
  • The American Recovery and Reinvestment Act has had a lasting impact on business strategies related to R&D investments by establishing a framework that incentivizes continuous innovation. By expanding R&D tax credits, it encouraged businesses not only to enhance their short-term capabilities but also to commit to long-term research initiatives. As companies recognized the financial benefits associated with R&D activities under ARRA, many developed strategic plans that prioritize innovation as a key driver for competitive advantage in their respective markets.

Related terms

Stimulus Package: A package of economic measures put together by a government to stimulate a struggling economy.

Tax Credits:

Deductions from the total amount of taxes owed, which can incentivize specific behaviors like investment in R&D.

Great Recession: A severe worldwide economic crisis that occurred from late 2007 through mid-2009, leading to high unemployment and significant financial market turmoil.