Expansionary fiscal policy
A)increases aggregate demand.
B)decreases aggregate demand.
C)increases short-run aggregate supply.
D)increases long-run aggregate supply.
E)A, C, and D are correct.

Question

Quizplus · Accepted Answer

Expansionary fiscal policy involves government increasing its spending or decreasing taxes in order to stimulate the economy. This increase in government spending or consumer disposable income leads to an increase in aggregate demand since consumers have more money to spend and businesses have more sales to make. Therefore, choice A is correct as it correctly identifies that expansionary fiscal policy increases aggregate demand.

Expansionary Fiscal Policy