How To Fix An Economic Crisis: Fiscal Policy

The video tutorial discusses fiscal policies, focusing on contractionary and expansionary approaches. Contractionary policy involves taxing more than spending during economic prosperity, while expansionary policy reduces taxes to stimulate spending. Fiscal stimulus, like direct cash payments or infrastructure projects, can boost the economy through the multiplier effect. However, supply-side crises pose challenges, as they can lead to inflation and require different government interventions.

What is the primary goal of contractionary fiscal policy?

• To stimulate economic growth

• To increase government spending

• To reduce taxes

• To save money during economic prosperity

How does expansionary fiscal policy aim to stimulate the economy?

• By taxing less than what is spent

• By increasing interest rates

• By reducing government spending

• By increasing taxes

Which type of tax adjustment is considered fast-acting in fiscal policy?

• Income tax reduction

• Luxury tax implementation

• Sales tax increase

• Property tax adjustment

What is the multiplier effect in the context of fiscal stimulus?

• The decrease in inflation rates

• The increase in government debt

• The repeated cycle of spending leading to more spending

• The reduction in unemployment rates

Why might infrastructure spending be considered a slower form of fiscal stimulus?

• It is less costly than direct cash injections

• It has a higher multiplier effect

• It involves long planning and construction times

• It requires less workforce

What is a major challenge of a supply-side economic crisis?

• Shortage of goods and services

• Decreased inflation rates

• Increased government revenue

• Excessive consumer demand

Why is monetary policy often ineffective during supply-side crises?

• It leads to deflation

• It cannot address supply shortages

• It increases consumer spending

• It reduces government debt