What does fiscal policy focus on?
A) on manipulating aggregate demand, in order to smooth out business fluctuations
B) on manipulating aggregate supply, in order to smooth out business fluctuations
C) on manipulating both aggregate supply and aggregate demand, in order to smooth out business fluctuations
D) on manipulating aggregate demand, in order to stimulate the economy, and on manipulating aggregate supply, in order to contract it

Question

What does fiscal policy focus on?  
A) on manipulating aggregate demand, in order to smooth out business fluctuations 
B) on manipulating aggregate supply, in order to smooth out business fluctuations 
C) on manipulating both aggregate supply and aggregate demand, in order to smooth out business fluctuations 
D) on manipulating aggregate demand, in order to stimulate the economy, and on manipulating aggregate supply, in order to contract it

Quizplus · Accepted Answer

Fiscal policy focuses on manipulating aggregate demand by adjusting government spending and taxation to stabilize the economy and counter business fluctuations. It aims to stimulate economic growth and reduce unemployment during recessions by increasing government spending and cutting taxes. Conversely, it aims to cool down an overheating economy during booms by decreasing government spending and raising taxes.

What Does Fiscal Policy Focus On