When Congress reduces spending in order to balance the budget,it needs to consider
A)both the short-run effects on aggregate demand and aggregate supply, and the long-run effects on saving and growth.
B)only the short-run effects on aggregate demand and aggregate supply.
C)only the long-run effects on saving and growth.
D)the long-run effects on aggregate demand and aggregate supply.

Question

Quizplus · Accepted Answer

When Congress reduces spending to balance the budget, it needs to consider both the short-run effects on aggregate demand and supply, such as a possible decrease in consumer spending and a reduction in production and employment, as well as the long-run effects on saving and growth, which can affect the economic well-being of future generations. A proper understanding of these short- and long-run effects is critical to ensuring fiscal policies that promote sustainable economic growth and prosperity. Therefore, option A is the best choice.

When Congress Reduces Spending in Order to Balance the Budget,it