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Classics 7
  • 9/5/2024
Learn the concept of fiscal policy in two minutes
Transcript
00:00Hey everyone, welcome to our channel.
00:02Today, we're diving into a topic that impacts all of us fiscal policy.
00:07What is it?
00:08How does it work?
00:09And why should you care?
00:11Let's break it down.
00:13Fiscal policy is the government's approach to managing the economy through spending and
00:17taxation.
00:18The two main tools are government spending.
00:21This includes money spent on public services, infrastructure, and social programs.
00:27Taxes.
00:28These are the funds collected from individuals and businesses.
00:33Governments use these to finance spending.
00:35So fiscal policy is all about balancing the economy by adjusting these to lever spending
00:40and taxes.
00:42Fiscal policy generally falls into two categories.
00:45One, expansionary fiscal policy, used during a recession or economic slowdown, involves
00:53increasing government spending and or cutting taxes.
00:56The goal is to boost demand, create jobs, and stimulate growth.
01:01Two, contractionary fiscal policy, used when the economy is overheating or inflation is
01:07rising too fast, involves cutting government spending and or raising taxes.
01:13The aim is to slow down economic activity and control inflation.
01:18Okay, so how does all this affect your day-to-day life?
01:22More government spending could mean better infrastructure, more jobs, or enhanced public
01:28services.
01:29Tax cuts give you more disposable income, which can lead to more consumer spending.
01:35However, higher taxes or reduced spending can result in fewer government services or
01:40higher costs for things like health care and education.
01:44But what happens when governments spend more than they collect in taxes?
01:49This is called a fiscal deficit.
01:52Deficits occur when the government borrows money to cover its spending.
01:56Over time, deficits contribute to national debt.
01:59Governments have to balance spending with borrowing to avoid long-term debt problems.
02:04Fiscal policy sounds simple, right?
02:07Spend more when times are tough.
02:09Spend less when times are good.
02:11But it's not that easy.
02:13Time lags.
02:14It can take time for fiscal policy changes to impact the economy.
02:18With fiscal influence, policymakers might prioritize short-term goals over long-term
02:23sustainability.
02:24Debt issues, excessive debt can lead to higher taxes and lower government spending in the
02:29future.
02:30That's a quick overview of fiscal policy.
02:33It's a key tool that governments use to manage the economy, but it comes with trade-offs
02:38and challenges.
02:39If you found this video helpful, make sure to like, subscribe, and leave any questions
02:45in the comments.
02:47See you in the next video.
02:48Thanks for watching.
02:50Subscribe for more economics and finance content.

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