00:01
All right, so we are to define the following terms.
00:04
The first term we have is fiscal policy.
00:07
What is fiscal policy? it is a policy on how government raises revenue through taxation and then how government spends money and the impact of these activities on the economy.
00:19
This is what we refer to us fiscal policy.
00:21
We have two types of fiscal policy.
00:23
Mainly we have the expansionary fiscal policy, which is a policy designed to boost the economy.
00:30
There is a policy that encourages more spending by government and then lowering of taxes all in an attempt to cap high unemployment, mostly during a recession.
00:44
There also have what we call the contractional fiscal policy, which is a policy designed to slow down economic growth in case of high inflation by increasing taxes and then also lowering government expenditure or spending.
01:01
We also have what we call crowding out.
01:04
This is simply the situation where an increase in government spending leads to a fall in a private sector spending and investment because the government spending is not able to increase aggregate demand.
01:16
So the private sector spending is also discouraged or investment is discouraged.
01:22
Now we also have a call the crowding in is the opposite of the crowding out...