Note: This is post #128 in a weekly video series on basic economics.

Effective fiscal policy has to be timely, targeted, and temporary. But how the central bank, businesses, and consumers respond to fiscal policy also plays a role in how effective it is, says economist Alex Tabarrok.

In this video by Marginal Revolution University, Alex Tabarrok considers how about how businesses and consumers might respond to expansionary fiscal policy.

(If you find the pace of the videos too slow, I’d mend 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.