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Online Lessons

Evaluating Fiscal Policy (Online Lesson)

  • Levels: AS, A Level, IB
  • Exam boards: AQA, Edexcel, OCR, IB, Eduqas, WJEC

In this online lesson, students will cover some key evaluation points for fiscal policy, including the Laffer curve and the Phillips curve, amongst other aspects.

WHAT YOU'LL STUDY IN THIS ONLINE LESSON

  • The Laffer curve and its implications for tax policy
  • The nature of macroeconomic trade-offs, including the (short-run) Phillips curve
  • The principles of "good taxes"
  • The meaning of crowding out, with an introduction to Keynesian vs Neoclassical perspectives on expansionary fiscal policy, and a reminder of the multiplier process
  • The difference between discretionary and automatic fiscal policy
  • A consideration of the UK government's fiscal response to the Global Financial Crisis

Additional teacher guidance is provided at the end of this online lesson.

HOW TO USE THIS ONLINE LESSON

Follow along in order of the activities shown below. Some are interactive game-based activities, designed to test your understanding and application of fiscal policy. Others are based on short videos, including activities for you to think about and try at home.

If you would like to download a simple PDF worksheet to accompany the video activities, you can download it here: Evaluating Fiscal Policy. You can print it off and annotate it for your own notes, or make your own notes on a separate piece of paper to add to your school/college file.

ACTIVITY 1: VIDEO - FISCAL POLICY KEY TERMS REMINDER

In this video, we'll work through a simple game to remind you of some of the key terms associated with fiscal policy. You will need to feel confident with these key terms ahead of moving through the rest of this online lesson.

Evaluating Fiscal Policy: Video 1

ACTIVITY 2: INTERACTIVE GAME - COMPARING GOVERNMENT SPENDING

A key aspect of being able to evaluate well in your exam is the ability to use real-life examples and evidence to either support or argue against your points. In this Higher or Lower activity, you can compare the levels of government spending between different countries.

ACTIVITY 3: VIDEO - THE LAFFER CURVE

The Laffer curve and its policy implications underpinned much of the economic policy in the 1970s and 1980s in both the UK and the US, which aimed to reduce the rates of tax on high earners. This video explores the nature of the Laffer curve as well as providing some key evaluation points regarding its usefulness.

Evaluating Fiscal Policy: Video 2

ACTIVITY 4: WIDER READING ON THE LAFFER CURVE

Take at the articles below, looking at the application of the Laffer curve principles to modern policy making:

Polly Toynbee in The Guardian, writing in July 2019

A perspective on US Congresswoman Alexandria Ocasio-Cortez's wealth tax proposal, in The Guardian, from January 2019

If you want a really challenging read, perhaps if you are considering economics at university, then try this report from the Brookings Institute.

ACTIVITY 5: INTERACTIVE GAME - APPLICATION OF THE LAFFER CURVE

This interactive game makes use of some remarkable data generated by the economist Jacob Lundberg from Uppsala University, in which the current rate of marginal tax on high earners is compared with the estimated Optimal Tax Rate for different countries. How will you get on?

ACTIVITY 6: VIDEO - TRADE OFFS AND THE (SHORT RUN) PHILLIPS CURVE

In this video, we explore the meaning of "trade-offs" in macroeconomic policy, and look at the impact of rising growth (due to expansionary fiscal policy) on other macro objectives. We then take a closer look at an important trade-off - inflation and unemployment - using the short-run Phillips curve.

Evaluating Fiscal Policy: Video 3

ACTIVITY 7: INTERACTIVE GAME - REVIEWING THE MULTIPLIER

In this short quiz, you can have a go at 5 calculation questions relating to the multiplier - get your calculator ready! You will need to have a good understanding of the multiplier to help you with Activity 9.

ACTIVITY 8: EXAM SKILLS

Download this example essay, which considers whether the UK tax system should become more progressive. You should:

  1. Read through the essay and the accompanying examiner commentary carefully
  2. Write down 5 ways in which this essay demonstrates good exam technique
  3. Highlight any points that you would not have thought to include yourself, if you had been given this essay title for homework
  4. Note down any ways in which you think this essay could have been improved

In activity 9, there is an exam-style written task in which you can use your knowledge of exam technique developed in this activity.

ACTIVITY 9: VIDEO - CROWDING OUT

In this video, we explore the meaning of crowding out and start to take a look at some of the differences between the Keynesian perspective on fiscal policy and the Neoclassical perspective on fiscal policy. Using these different perspectives can be a great way to introduce evaluation in exam answers on fiscal policy. At the end of this video, there is an exam-style task in which you need to write an essay: ask your teacher to let you know how many marks are available for the essay.

ACTIVITY 10: INTERACTIVE GAME - GLOBAL CORPORATION TAX RATES

As we noted in Activity 2, one way to evaluate in exams is by using real-world data and evidence to either support or argue against your points. In this game, you can compare different rates of corporation tax across the world.

ACTIVITY 11: VIDEO - DISCRETIONARY AND AUTOMATIC FISCAL POLICY

In this short video, we take a look at the difference between discretionary and automatic fiscal policy, along with some practical application. Find out why governments may say that they intend to have a "balanced budget" over the course of the economic cycle.

Evaluating Fiscal Policy: Video 5

ACTIVITY 12: VIDEO - AUSTERITY

Here, we take a practical look at how the UK government responded with fiscal policy in the aftermath of the Global Financial Crisis.

ACTIVITY 13: TEST YOURSELF!

Here are 15 multiple-choice questions testing some of the key concepts covered throughout the online lesson on fiscal policy. Why not send your teacher a screenshot of your score?

ACTIVITY 14: ENRICHMENT TASK 1 - BE THE PRESIDENT

In this task, you adopt the role of the US President, 100 days into the Presidency in 2017. You need to decide on your fiscal policy. You can download the data sheet here.

ACTIVITY 15: ENRICHMENT TASK 2 - THE GOVERNMENT GAME

Here is a fantastic interactive game that you can play with your classmates, even though you may all be studying at home! You and your teachers can access the game here.

EXTENSION TASK

If you want to read more about how the Phillips curve has been used, critiqued, and changed over time, here is a good starting point. You can easily extend your own knowledge on this topic by carrying out your own research online. Perhaps you can find an innovative way to present the story of the Phillips curve - we would love to see some cartoon stories!

ADDITIONAL TEACHER GUIDANCE

This online lesson includes:

  • Around 45 minutes of guided video activity, spread over 6 videos
  • Around 20 - 25 minutes of "thinking time" and student activity throughout the videos
  • 5 interactive games, focusing on real-world application and quantitative skills, as well as final MCQ test - these can be replayed as many times as students would like
  • An exam-style written task at the end of Activity 9 - we suggest that you will need to tell your students how much you would like them to write!
  • 1 wider-reading task on the Laffer curve and modern day application
  • 2 enrichment tasks, 1 of which can be done by students independently and another which you may like to coordinate with your class
  • An extension reading task on the Phillips curve.

We suggest allowing 90 minutes for the main activities, an additional 15 to 30 minutes for the exam-style written task, and around 1 hour for the enrichment / extension tasks (although these could take longer depending on the level of student engagement)

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