Fiscal policy is a good option to stimulate an economy when

Question

Quizplus · Accepted Answer

Fiscal policy is a good option to stimulate an economy when consumer spending is very low. This is because fiscal policy involves government spending and taxation changes to alter the level of aggregate demand in the economy. When consumer spending is low, it can lead to a decrease in aggregate demand, causing a recession. However, if the government increases its spending or reduces taxes, it can encourage households and businesses to spend more, thereby increasing aggregate demand and stimulating the economy.

Fiscal Policy Is a Good Option to Stimulate an Economy