What does fiscal policy primarily affect in the short run?
A)saving
B)investment
C)aggregate demand
D)aggregate supply

Question

Quizplus · Accepted Answer

Fiscal policy primarily affects aggregate demand in the short run. This is because changes in government spending and taxation can directly affect consumers' disposable income and businesses' investment decisions, which in turn influence their spending behavior. This, in turn, affects aggregate demand for goods and services in an economy. While fiscal policy can also have some impact on saving and investment, their effects are generally felt more in the long run. Fiscal policy does not directly affect aggregate supply in the short run.

What Does Fiscal Policy Primarily Affect in the Short Run