Introduction to Fiscal Policy

Introduction to Fiscal Policy

Fiscal policy is one of three pillars of macroeconomic policy that can be used to influence the trajectory and growth rate of an economy. In this video, Tim provides an overview of macroeconomic theory that will provide the foundation for a more detailed discussion on fiscal policy.
Overview

Fiscal policy refers to the use of government spending and tax policy to influence economic growth in order to smooth variations in the business cycle, achieve full employment and reduce poverty. Fiscal policy is often used by governments on a discretionary basis to influence business cycles. The basis for understanding fiscal policy is macroeconomic theory, meaning understanding the relationship between prices and economic output (i.e. GDP). Most economists trace the roots of active fiscal policy to well-known British economist John Maynard Keynes. Keynes was especially influential throughout the first half of the 20th century, including during the Great Depression of the 1930s in the United States. His research and findings remain highly relevant today, and his extensive work at the time is why proactive fiscal policy is still often referred to today as “Keynesian Economics”.

Key learning objectives:

  • Explain the macroeconomic theory that is the basis for economic growth and the foundation of fiscal policy

  • Explain why an economy has economic cycles, often requiring government intervention in the form of fiscal policy

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Summary
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Expert
Tim Hall

Tim Hall

Tim has nearly 30 years of experience in the international capital markets at major global institutions and has worked both on the buy-side and the sell-side. He has worked with numerous companies, banks and governments in developed and emerging markets on investment grade and high yield bond issues, from straight-forward to very complex acquisition/leveraged financings. Tim has also been on the board of a UK “challenger bank.” Tim has an MBA from the Wharton School, and is a CFA.

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