Fiscal Policy: Short-Term vs Long-Term Impact and the Importance of Productive Capacity

The video lecture covers fiscal policy, focusing on its impact on economic performance in both the short and long run. It explains expansionary and contractionary fiscal policies, using examples to illustrate their effects on aggregate demand and economic growth. The lecture compares classical and Keynesian views, highlighting the role of spare capacity in determining inflationary impacts. It emphasizes the importance of long run aggregate supply and discusses various fiscal policy initiatives, such as infrastructure and education, in enhancing productive capacity.

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