Fiscal policy actions that are intended to have long-run effects attempt to increase ________ through changing ________.
A)aggregate demand; government spending
B)aggregate supply; taxes
C)aggregate demand; taxes
D)aggregate supply; government spending

Question

Quizplus · Accepted Answer

Fiscal policy actions that target long-run effects aim to improve the economy's productivity and increase the potential output of goods and services, which is addressed through changes in aggregate supply. This is typically achieved through policies that incentivize investment, innovation, and labor force participation, such as tax cuts or increased government spending on education and infrastructure. Thus, the correct choice is B, which identifies aggregate supply and taxes as the targets of such actions. Choices A and C incorrectly focus on aggregate demand, while choice D mentions government spending but does not specify the policy's long-run effects.

Fiscal Policy Actions That Are Intended to Have Long-Run Effects