Exploring Fiscal Policy Fundamentals

The video explains fiscal policy, highlighting its role in managing a country's economy through taxation and spending. It references John Maynard Keynes' ideas on influencing macroeconomic productivity. Using the example of Recess Nia, the video discusses how fiscal policy can stimulate a stagnant economy by lowering taxes and increasing government spending on infrastructure. However, it also presents the opposing view that such policies may not create new jobs. In a robust economy, the video suggests reducing spending and raising taxes to combat inflation, potentially leading to a budget surplus for future economic downturns.

Who is associated with the concept of fiscal policy?

• John Maynard Keynes

• Milton Friedman

• Adam Smith

• David Ricardo

What is a primary goal of fiscal policy?

• To reduce government intervention

• To influence macroeconomic productivity

• To privatize public services

• To eliminate taxes

How might a government attempt to stimulate a stagnant economy according to the video?

• By increasing taxes

• By reducing public spending

• By lowering taxes

• By halting infrastructure projects

What is the effect of lowering taxes according to the fiscal policy example?

• Reduces public infrastructure

• Decreases consumer spending

• Increases take-home pay and spending

• Leads to immediate inflation

What is a potential criticism of using fiscal policy to create jobs?

• It increases government transparency

• It reduces private sector jobs

• It can lead to deflation

• It eliminates the need for taxes

Why do some critics argue against fiscal policy for job creation?

• It does not create new jobs, impacting private sector jobs

• It leads to overregulation

• It creates too many government jobs

• It only benefits the wealthy

What might be a consequence of a successful fiscal policy in boosting the economy?

• Immediate recession

• Increased inflation

• Decreased government spending

• Lowered employment rates

What action can a government take to combat inflation in a robust economy?

• Reduce spending and raise taxes

• Lower taxes

• Increase spending

• Increase borrowing

What is a likely use of a budget surplus in a robust economy?

• To eliminate all taxes

• To expand military spending

• To increase government salaries

• To fund future economic downturns

What is the main danger in a robust economy as per the video?

• Inflation

• Hyperinflation

• Deflation

• Stagflation