Government spending and taxation

• What is the main focus of the video on fiscal policy?

  The video introduces fiscal policy by discussing government spending and taxation.
• What are the four different types of government spending?

  • Current spending: day-to-day spending on public services and wages
  • Capital spending: spending on infrastructure projects
  • Welfare spending: spending on benefits and pensions
  • Debt interest spending: cost of servicing debt interest
• What is current spending in government spending?

  Current spending refers to day-to-day spending on public services and paying public sector wages.
• What does capital spending involve?

  Capital spending involves government spending on infrastructure projects, including new projects and upgrades.
• What is welfare spending?

  Welfare spending is government spending on benefits and pensions in the economy.
• What is debt interest spending?

  Debt interest spending is the cost for the government of servicing debt interest only.
• Why does debt interest spending not increase aggregate demand (AD)?

  Debt interest spending does not increase AD because it is a non-productive form of government spending.
• How does higher government spending influence the macroeconomy?

  Higher government spending increases aggregate demand, which can boost economic growth and reduce unemployment.
• What is expansionary fiscal policy?

  Expansionary fiscal policy involves increasing government spending to boost aggregate demand during a recession.
• How can government spending help fight deflationary pressures?

  Government spending can help fight deflationary pressures by increasing aggregate demand.
• How does government spending reduce income inequality?

  Government spending on welfare benefits and pensions raises disposable income for low-income individuals.
• What role does government spending play in correcting market failure?

  Government spending can correct market failure through subsidies, state provision, and advertising campaigns.
• What are the two different types of taxation?

  The two types of taxation are indirect taxes and direct taxes.
• What are indirect taxes?

  Indirect taxes are expenditure taxes levied on firms that can be transferred to consumers.
• What are specific indirect taxes?

  Specific indirect taxes are taxes levied per unit sold, regardless of the number of units sold.
• What are ad valorem taxes?

  Ad valorem taxes are percentage taxes based on the final price of the good or service sold.
• How do ad valorem taxes affect government revenue?

  Ad valorem taxes generate more revenue as the price of goods increases since they are a percentage of the final price.
• What are direct taxes?

  Direct taxes are taxes on income that cannot be transferred to anyone else.
• What are examples of direct taxes?

  Examples of direct taxes include income tax and corporation tax.
• Why is taxation often used in the economy?

  Taxation is used to raise government revenue to fund public services and other government initiatives.
• How can direct tax cuts influence the macroeconomy?

  Direct tax cuts can boost aggregate demand, helping to reduce unemployment and promote economic growth.
• How can higher rates of taxation cool the economy?

  Higher rates of taxation can reduce aggregate demand, helping to cool the economy during a positive output gap.
• How can taxation help reduce budget deficits?

  Taxation can help reduce budget deficits by increasing government revenue.
• How can taxation help redistribute income?

  Taxation can redistribute income by increasing taxes on high-income households and using the revenue to fund benefits for low-income individuals.
• How can reducing regressive taxation help reduce income inequality?

  Reducing regressive taxation can lower the tax burden on low-income households, increasing their disposable income.
• How can taxation help fight market failure?

  Taxation can address market failure by imposing indirect taxes to reduce overconsumption and overproduction.
• What are tariffs and how do they function?

  Tariffs are taxes on imports that raise prices to protect domestic producers from foreign competition.
• What is the overall purpose of fiscal policy?

  • To influence the macroeconomy
  • To increase aggregate demand
  • To reduce income inequality
  • To correct market failure
• What will the next video in the series cover?

  The next video will cover different types of taxation systems.