Which fiscal policy will increase aggregate supply?
A) increasing tax rates on consumers
B) increasing tax rates on businesses
C) allocating more money for federal student loans
D) instituting more regulations on businesses

Question

Quizplus · Accepted Answer

Allocating more money for federal student loans can increase aggregate supply by increasing human capital. By providing more funding for students to pursue higher education, they will be equipped with better skills and knowledge which will lead to increased productivity, output and economic growth in the long run. Options A, B, and D are likely to decrease aggregate supply as they lead to higher costs of production, lower investment and less innovation respectively.

Which Fiscal Policy Will Increase Aggregate Supply