Note: This is post #124 in a weekly video series on basic economics.

What is fiscal policy? As economist Tyler Cowen explains, it’s a government’s policies on taxes, spending, and borrowing. But how it’s practiced is a little plicated. Fiscal policy can be used in an effort to mitigate fluctuations in the business cycle so as to soften the effects of booms and busts.

In this video by Marginal Revolution University, Cowen discusses expansionary fiscal policy and explains the “fiscal multiplier.” Cowen also shows why fiscal policy doesn’t always work as intended.

(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.)

Clickhereto see other videos in the Introduction to Economics series.