00:01
Hey guys, and welcome to another economics example where we're going to be talking some more about fiscal policy.
00:09
So there are supply side and demand side fiscal policies.
00:13
So it's worth talking about how they're different.
00:19
So we'll start with demand side because it's kind of the easier and more simple one to wrap your head around.
00:26
First of all, we should probably draw the keynesian economics graph here, which has your gdp on the x -axis represented by y there, and then the price of a basket of goods on the y -axis there.
00:44
And then you have your aggregate demand, and then you have your long -run aggregate supply.
00:56
So, as you might guess by the names, the demand -side fiscal policies are aimed at aggregate demand.
01:05
So what they are trying to do is increase aggregate demand when it falls or also decrease it.
01:13
Increase or decrease it depending on what's going on in the economy.
01:17
So if there is a recession, they're going to be wanting to increase aggregate demand.
01:24
So the way that they do that, typically is by increasing government spending to stimulate.
01:37
Aggregate demand or decrease in government spending to lower aggregate demand.
01:47
Supply side, which is often seen as the more subtle and better approach, is, as you may have guessed, focused on the long -run aggregate supply, maybe even the short -run aggregate supply, actually...