Exploring Fiscal Policy and Automatic Stabilizers

The video discusses fiscal policy, its tools, and how it can address economic issues like unemployment and inflation. It covers expansionary and contractionary policies, the balanced budget multiplier, and automatic stabilizers. Challenges such as national debt and operational lags are also highlighted.

What is the primary goal of fiscal policy?

• To increase international trade

• To manage the education system

• To combat unemployment and inflation

• To regulate the stock market

Which fiscal policy tool directly affects consumer spending by altering disposable income?

• Taxes

• Minimum wage adjustments

• Interest rates

• Trade tariffs

What is the effect of increasing government spending on the aggregate demand curve?

• Becomes flatter

• Remains unchanged

• Shifts to the right

• Shifts to the left

What does contractionary fiscal policy aim to combat?

• Income inequality

• Unemployment

• Inflation

• Deflation

What is a potential downside of contractionary fiscal policy?

• Improved trade balances

• Decreased national debt

• Higher levels of unemployment

• Increased inflation

How does the balanced budget multiplier concept affect real GDP when taxes and spending are increased equally?

• Decreases GDP

• Unpredictable effects on GDP

• Increases GDP by the amount of increase

• No effect on GDP

Which of the following is an example of an automatic stabilizer?

• Income taxes

• Central bank policies

• Educational grants

• Corporate subsidies

What is a major concern associated with expansionary fiscal policy?

• Decreased consumer confidence

• Lowered interest rates

• Reduced foreign investment

• Increased national debt

What does the term 'crowding out' refer to in the context of fiscal policy?

• Excluding small businesses from government contracts

• Limiting public access to services due to budget cuts

• Reducing private investment due to increased government borrowing

• Decreasing consumer spending through higher taxes

Why might fiscal policy actions have delayed effects on the economy?

• Immediate public resistance

• Operational lag times

• Instant changes in market sentiment

• Rapid adjustments in international trade