Note: This is post #126 in a weekly video series on basic economics.
The best case for fiscal policy happens during a recession caused by an aggregate demand shock, says economist Alex Tabarrok. Even so, it’s hard to get it right because the U.S. economy is massive and complex.
In this video by Marginal Revolution University, Tabarrok highlights the three factors for an ideal stimulus—Timely, Targeted, and Temporary—and notes that all of these characteristics present some problems for enacting fiscal policy.
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Click here to see other videos in the Introduction to Economics series.