How Government Uses Fiscal Policy to Influence the Economy | Episode 23

00:06:49
https://www.youtube.com/watch?v=QbxXns0zero

Resumen

TLDRThe video discusses fiscal policy and its role in government influence over the economy. Fiscal policy involves the use of taxation and government spending as tools to control economic growth. The video specifically highlights the Economic Stimulus Act of 2008, which was signed into law during a time of economic recession in hopes of bolstering consumer spending by financially aiding citizens. This act aimed to increase disposable incomes, thus encouraging consumer expenditures, which constitute a large part of the GDP. It explained the cyclical nature of how increased spending boosts business demand, leading to more hiring and ultimately more economic activity. While there is some debate about the act's effectiveness, many studies suggest it had a positive, albeit limited, impact. The video contrasts this with monetary policy, which involves managing the money supply, primarily handled by the Federal Reserve Bank, but it focuses on fiscal measures.

Para llevar

  • 💡 Fiscal policy involves government's taxation and spending to influence the economy.
  • 💰 The 2008 Economic Stimulus Act aimed to boost the economy by issuing payments to citizens.
  • 🔄 Consumer spending is a significant component of GDP and economic health.
  • 📉 Lowering tax rates can stimulate consumer spending by increasing disposable incomes.
  • 🏢 Increased consumer demand can lead to higher business activity and more jobs.
  • 💼 Jobs provide funds, allowing people to reinvest into the economy, creating a cyclical effect.
  • 📊 A large part of GDP depends on consumer spending, illustrating the importance of fiscal policies.
  • 📈 Effective fiscal policy can reduce unemployment by encouraging business growth.
  • 🛒 Americans generally spend rather than save, impacting economic policies.
  • 🧐 There is debate over the effectiveness of the 2008 Economic Stimulus Act, though studies show it had some positive impact.

Cronología

  • 00:00:00 - 00:06:49

    The video discusses how the government influences the economy, focusing on fiscal policy and briefly mentioning monetary policy. Fiscal policy refers to the government's use of taxation and spending to affect the economy. The video emphasizes the significance of fiscal policy by illustrating the 2008 Economic Stimulus Act, which involved issuing payments to U.S. citizens to encourage consumer spending. This spending aimed to boost demand for goods and services, prompting businesses to hire more employees, thereby reducing unemployment and increasing disposable income to be cycled back into the economy. The rationale is that consumer spending accounts for two-thirds of the Gross Domestic Product (GDP), which is crucial for economic growth. The effectiveness and cost of such fiscal policies, including tax rate adjustments, often spark debate over their actual economic impact.

Mapa mental

Mind Map

Preguntas frecuentes

  • What is fiscal policy?

    Fiscal policy is the government's use of taxation and spending to influence the economy.

  • What was the purpose of the Economic Stimulus Act of 2008?

    The Economic Stimulus Act of 2008 aimed to mitigate the effects of the recession by issuing payments to US citizens to encourage consumer spending.

  • How does fiscal policy affect unemployment rates?

    Fiscal policy, like government spending, can increase demand which may lead businesses to hire more workers, thus potentially reducing unemployment rates.

  • Why is consumer spending important to the economy?

    Consumer spending is crucial as it makes up a significant portion of the GDP, driving business growth, production, and job creation.

  • How can taxation influence the economy?

    By adjusting tax rates, the government can control the amount of disposable income consumers have, thereby impacting their spending ability.

  • What role does the Federal Reserve Bank play in monetary policy?

    The Federal Reserve Bank controls monetary policy by managing the money supply to influence the economy.

  • Did the 2008 Economic Stimulus Act significantly help the economy?

    There is debate on its significance, but most research suggests it provided a moderate benefit, despite its cost.

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  • 00:00:01
    well in this brief video we're going to
  • 00:00:02
    talk about how the government influences
  • 00:00:04
    the economy uh there are two different
  • 00:00:08
    tools that the government has at its
  • 00:00:10
    disposal to influence the the economy
  • 00:00:13
    itself and those are both fiscal policy
  • 00:00:16
    as well as monetary policy um for this
  • 00:00:18
    brief video we're going to focus on
  • 00:00:20
    fiscal policy and explaining what that
  • 00:00:22
    is and really how that works how does it
  • 00:00:25
    actually uh affect the uh economy at a
  • 00:00:29
    as a whole uh but fiscal policy is the
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    government's use of Taxation as well as
  • 00:00:35
    spending in an attempt to influence the
  • 00:00:38
    economy okay monetary policy are
  • 00:00:41
    attempts by the government to influence
  • 00:00:44
    the economy by controlling the money
  • 00:00:46
    supply or the amount of money in
  • 00:00:48
    circulation uh the primary uh the
  • 00:00:52
    primary body or government entity that
  • 00:00:54
    is in charge of monetary policy is the
  • 00:00:56
    Federal Reserve Bank as I said before
  • 00:00:59
    we're not going to get into into too
  • 00:01:00
    much on monetary policy this video is
  • 00:01:02
    going to focus on fiscal policy and
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    ultimately what the effect is but back
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    to fiscal policy uh we talked about
  • 00:01:09
    those two different avenues that the
  • 00:01:11
    government has to essentially affect the
  • 00:01:14
    economy or influence the economy uh the
  • 00:01:16
    first of which is taxation of course
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    being the amount of money that you and I
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    of course pay in taxes uh every year and
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    also spending uh the government is
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    obviously a a big spender and has a a
  • 00:01:29
    lot of
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    uh assets at its disposal and it can in
  • 00:01:33
    turn use those particular assets to
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    spend towards different projects with an
  • 00:01:37
    attempt to influence the economy so you
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    might ask really well how does that work
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    why does what the government does with
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    regards to Taxation and what it spends
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    why does it matter and if you look at
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    this brief diagram I have here the
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    government spending the government is a
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    very very large entity obviously
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    controls a lot of money and so one
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    example I'm going to provide is the
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    economic stimulus Act of 2008 remember
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    that this was signed by President George
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    Bush at the time and at this point in
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    time we were kind of potentially getting
  • 00:02:11
    into the economic recession that we all
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    know as of now obviously did take place
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    and so in an attempt to maybe lessen the
  • 00:02:18
    harmful effects of the recession or
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    ideally eliminate the effects entirely
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    uh they signed and approved the economic
  • 00:02:27
    stimulus Act of 2008 and if you remember
  • 00:02:30
    that particular Act made it so that
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    there was an additional uh payment
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    issued to US citizens in certain dollar
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    amounts I believe the amount was $600
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    per individual and potentially up to
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    $1,200 uh per couple uh now that that
  • 00:02:49
    might be a little different but that's
  • 00:02:50
    roughly the dollar amounts and what they
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    are and that was a payment that was made
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    directly to Consumers directly to people
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    like you and I okay because the the idea
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    behind it was that if we in turn had an
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    increased uh surplus of money access to
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    funds that we didn't normally have that
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    we would probably spend that right if
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    you look at savings rates in the US we
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    are historically very very poor Savers
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    we spend a lot of money we don't
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    necessarily uh shove any of it for for
  • 00:03:20
    future use at least as a whole okay I
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    know individually some people are really
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    good but as a whole the United States we
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    like to spend money that's what we do
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    and so the government says you know what
  • 00:03:31
    what if we were to give people money
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    that they didn't normally have anywhere
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    from $600 to $1,200 roughly they would
  • 00:03:38
    in turn probably spend that and so if we
  • 00:03:40
    gave people access to money they would
  • 00:03:43
    in turn spend that money and that would
  • 00:03:44
    do is that would inject that back into
  • 00:03:46
    the economy right because you're paying
  • 00:03:48
    for goods and services okay which would
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    in turn mean that businesses now have
  • 00:03:54
    more demand okay and then of course what
  • 00:03:57
    happens when businesses have increased
  • 00:03:59
    demand you know they may not have the
  • 00:04:01
    human resources or the labor necessary
  • 00:04:04
    to accommodate or fulfill that demand
  • 00:04:07
    and what that causes businesses to do is
  • 00:04:10
    businesses to hire right and so we can
  • 00:04:12
    hopefully affect the unemployment rate
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    and then once people have jobs they in
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    turn have access to money and disposable
  • 00:04:21
    incomes that they can in turn re inject
  • 00:04:24
    back into the economy because the logic
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    being is someone who's unemployed
  • 00:04:27
    probably is not going to have a great
  • 00:04:29
    deal of disposable income they're
  • 00:04:31
    probably not going to be spending a
  • 00:04:32
    great deal of money on different goods
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    and services which is going to affect
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    our GDP or gross domestic product which
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    is essentially the income of a country
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    it's the total value of goods and
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    services that a particular country
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    produces within a given year now one
  • 00:04:49
    important factor to consider is that
  • 00:04:51
    2third of GDP is dependent upon consumer
  • 00:04:55
    spending it's dependent upon people like
  • 00:04:57
    you and I going out there and purchase
  • 00:04:59
    purchasing various goods and services
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    okay it's a very very big component and
  • 00:05:03
    so you can see if consumers like you and
  • 00:05:05
    I aren't spending money if we are
  • 00:05:08
    holding back what we have because we're
  • 00:05:10
    uncertain about what's going to go on in
  • 00:05:11
    the future in terms of the economy then
  • 00:05:13
    that's going to be bad for gross
  • 00:05:16
    domestic product that's going to be bad
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    for growth bad for production bad for
  • 00:05:20
    business bad for jobs okay and so you
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    can see how this whole cycle kind of
  • 00:05:25
    works interdependently right people need
  • 00:05:27
    access to money to turn buy goods and
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    services right businesses need people to
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    buy goods and services so they can be
  • 00:05:35
    profitable and in turn hire people and
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    then we of course want relatively low
  • 00:05:39
    unemployment rates because we want
  • 00:05:41
    people to have access to to funds and we
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    want them to have the ability to
  • 00:05:46
    reinvest those funds back into the
  • 00:05:48
    economy so it works in a very cyclical
  • 00:05:51
    type basis and it's extremely important
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    that we do have people who have access
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    to funds people that have jobs in those
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    different types of things so this is one
  • 00:06:02
    resource that the federal government has
  • 00:06:04
    is this fiscal policy piece you've seen
  • 00:06:07
    probably in years past where they've
  • 00:06:09
    adjusted tax rates right lowering tax
  • 00:06:11
    rates is another example of fiscal
  • 00:06:13
    policy because you're trying to keep as
  • 00:06:15
    much money as possible into the hands of
  • 00:06:17
    consumers in the hopes that they will
  • 00:06:19
    eventually spend that now there
  • 00:06:21
    obviously is some argument as to whether
  • 00:06:24
    or not consumers actually will spend
  • 00:06:26
    that money and there's some argument as
  • 00:06:29
    to whether or not the economic stimulus
  • 00:06:30
    Act of ' 08 actually was successful but
  • 00:06:34
    as a whole most of the research supports
  • 00:06:36
    that it did provide somewhat of an
  • 00:06:38
    increase somewhat of a benefit although
  • 00:06:41
    some people argue if it was really that
  • 00:06:43
    significant considering how expensive it
  • 00:06:45
    was to
  • 00:06:47
    implement
Etiquetas
  • fiscal policy
  • taxation
  • government spending
  • economic stimulus
  • consumer spending
  • unemployment
  • GDP
  • economic recession
  • Economic Stimulus Act 2008
  • Federal Reserve Bank