When Parliament reduces spending in order to balance the budget, which of the following does it need 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 Parliament reduces spending in order to balance the budget, it needs to consider both the short-run effects on aggregate demand and aggregate supply (such as changes in consumption, investment, and inflation) and the long-run effects on saving and growth (such as changes in productivity, innovation, and competitiveness). This is because reducing spending may have different impacts in the short run and in the long run, depending on the specific policies and economic conditions involved. Therefore, a holistic approach is needed to ensure that the budget reduction is sustainable and beneficial for the economy as a whole.

When Parliament Reduces Spending in Order to Balance the Budget