IB Fiscal Policy

Organised Post Index

Start here: What is Fiscal Policy?

• Fiscal Policy: When Governments Play Money Games

Discover how governments use fiscal policy to fix economic problems! From taxes to spending, learn how these tools impact inflation, unemployment & growth in this guide for IB Economics students.

Fiscal policy | Government spending | Taxation | Aggregate demand | Economic growth | Inflation control | Unemployment | Budget deficit | Transfer payments

• Fiscal Policy: The Sequel – When Governments Go Big or Go Home

Explore expansionary & contractionary fiscal policy! Learn how the Keynesian multiplier works, why economists disagree & what limits government economic intervention for IB Economics students.

Expansionary fiscal policy | Contractionary fiscal policy | Keynesian multiplier | Fiscal stimulus | Aggregate demand | Crowding out effect | Automatic stabilisers | Budget deficit | Economic intervention

Types of Taxes and Government Spending

• How Governments Fight Inequality: Taxes, Transfers and a Bit of Magic

Explore how governments use taxes and policies to fight poverty and inequality. IB Economics made simple with stories, jokes and real-life examples!

Taxes and inequality | Progressive and regressive taxes | Policies to reduce poverty | Direct and indirect taxes

Real-World Case Studies

UK Austerity Measures (2010–2019)

In response to the 2008–09 financial crisis, the UK government introduced a decade of austerity, cutting public spending to reduce budget deficits. Sectors like healthcare, education, and welfare saw major reductions. While the budget deficit improved, economic growth slowed, and income inequality worsened.

IB Economics Use: Great for evaluating contractionary fiscal policy and its social trade-offs. Use when discussing opportunity cost and equity vs efficiency.

Covid Stimulus Packages (2020–2022)

Governments worldwide used expansionary fiscal policy to fight the economic collapse caused by Covid-19. The US passed over $5 trillion in stimulus, while the EU implemented the €750 billion recovery fund. These included direct payments, business loans, and healthcare spending.

IB Use: Excellent example of short-run AD boosts, but also highlights concerns over rising debt and multiplier uncertainty.

Universal Basic Income Trial – Finland (2017–2018)

Finland tested a UBI programme by giving €560 / month to 2,000 unemployed people, with no work requirements. While it didn’t increase employment significantly, recipients reported better well-being and lower stress.

IB Use: Use to evaluate fiscal policy for equity, and debate its role in addressing structural unemployment or automation-related job losses.

Evaluation: Strengths and Limitations of Fiscal Policy

• Monetarist vs Keynesian – Economic Policy and Assumptions

Keynes vs Monetarists: who rules the macroeconomy? A fun dive into economic policy, sticky wages, and real-world shocks explained for IB Economics students.

Monetarist model | Keynesian economics | Sticky wages | Macroeconomic policy | Fiscal policy vs monetary policy | Macroeconomic equilibrium | IB Economics HL

Fiscal Policy + Equity & Sustainability

• When Governments Step In: How Economies Fight Externalities, One Awkward Policy at a Time

How do governments tackle pollution, plastic, and public bad behaviour? A fun, real-world guide to externalities for IB Economics students.

IB Economics externalities | Government intervention | Pigouvian taxes | Carbon tax examples | Tradable permits explained

Related Topics Worth Exploring

• Types of Unemployment Unemployment Uncovered: More Than Just Numbers

• Government Debt and Interest Rates

• Market Failure and Public Goods Why Market Failure Happens – The Good, the Bad, and the Unpriced

For access to all key diagrams, model answers, and exam strategies,

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