Understanding Fiscal Policy: Effects on Government Budget, National Debt, and the Economy

The video tutorial explains how government budgets can lead to a surplus, balance, or deficit, affecting national debt. It covers fiscal policy, distinguishing between expansionary and contractionary types, and their effects on aggregate demand, inflation, real output, and unemployment. The tutorial also touches on potential supply side impacts of fiscal policy, depending on government spending and taxation's influence on productivity and enterprise.

What happens to the national debt when a government budget is in surplus?

• The national debt decreases.

• The national debt remains unchanged.

• The national debt increases.

• The national debt is eliminated.

Which of the following is a characteristic of expansionary fiscal policy?

• Decrease in inflation

• Increase in aggregate demand

• Decrease in government spending

• Increase in taxation

What is likely to occur when a government implements contractionary fiscal policy?

• Decrease in real output

• Increase in unemployment

• Increase in inflation

• Increase in aggregate demand

How does contractionary fiscal policy affect the aggregate demand curve?

• It shifts outward.

• It shifts inward.

• It becomes steeper.

• It remains unchanged.

What determines the supply-side impact of fiscal policy?

• The level of national debt

• The government's spending priorities

• The rate of inflation

• The balance of trade