How does the government use fiscal policy to regulate aggregate demand?
A)by manipulating the energy department
B)by manipulating the money supply
C)by manipulating taxation and spending
D)by manipulating the treasury

Question

Quizplus · Accepted Answer

The government can use fiscal policy to regulate aggregate demand by manipulating taxation and spending. By lowering taxes, the government can increase disposable income, leading to higher consumption and higher aggregate demand. Similarly, the government can increase spending, which directly boosts aggregate demand. Alternatively, the government can increase taxes and reduce spending to decrease aggregate demand and lower inflationary pressures.

How Does the Government Use Fiscal Policy to Regulate Aggregate