Austerity
Austerity measures are attempts to significantly curtail government spending in an effort to control public-sector debt, particularly when a nation is in jeopardy of defaulting on its bonds.
The global economic downturn that began in 2008 left many governments with reduced tax revenues and exposed what some believed were unsustainable spending levels.
A government can impose an austerity programme and still spend far more than it receives in the form of taxes; For instance, say a government reached a deficit of 9% of GDP in the year of austerity, a very high figure by peacetime standards. But because this was less than the 11% of GDP in the year before, it counts as austerity.
Stimulus
An economic stimulus consists of attempts by government to financially stimulate an economy. An economic stimulus is the use of monetary or fiscal policy changes to kick start a lagging or struggling economy. Governments can use tactics such as lowering interest rates, increasing government spending and quantitative easing, to name a few, to accomplish this.
During 2008 recession, government deployed three focused fiscal stimulus packages in the form of tax relief to boost demand and increased expenditure on public projects to create employment and public assets (read Keynesian economics).