Depending on how fiscal policy is implemented,it can affect
A) only aggregate demand.
B) only aggregate supply.
C) both aggregate demand and aggregate supply.
D) neither aggregate demand nor aggregate supply.
E) monetary policy.

Question

Quizplus · Accepted Answer

Fiscal policy can affect both aggregate demand and aggregate supply. For example, if the government increases its spending on infrastructure, this can increase aggregate demand as it creates jobs and stimulates economic activity. However, if the government raises taxes, this reduces disposable income, and can decrease consumer spending, which negatively impacts aggregate demand. Additionally, changes in taxes can affect the incentive for firms to produce, thereby affecting aggregate supply.

Depending on How Fiscal Policy Is Implemented,it Can Affect