In this short video, Paul Solman discusses the importance of fiscal policy. After providing a historical overview of the origins of macroeconomics, which we discussed at the beginning of the course, he talks about the different reasons why government intervention in the economy may be necessary and beneficial. Please watch the video and answer the following 5 questions.
Economics Fiscal Policy
https://www.youtube.com/watch?v=5BwZbyr0Og0
1. What is one of the most important reasons for the government to have a role and try to influence the economy discussed in the video? (20 points)
2. When Paul talks about the equation of aggregate demand (GDP), he seems to be missing one of the key components. Which component is missing from the GDP equation and why do you think he decided to leave it out from his presentation? (20 points)
3. Based on the AD and AS model presented in the video, what is one of the main causes leading to higher prices in the economy? (20 points)
4. What are some of the problems stressed by the economists interviewed regarding the negative impact inflation can have on the economy? (20 points)
5. There are at least two different types of fiscal policy mentioned in the video. Focus on one and explain why it can have a positive impact on the economy. (20 points)
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