Fiscal policy affects aggregate demand:

Question

Quizplus · Accepted Answer

Fiscal policy can affect aggregate demand through two channels: government spending and taxes. It can have a direct impact on aggregate demand by increasing or decreasing government spending, which in turn can increase or decrease demand for goods and services. Fiscal policy can also have an indirect impact through changes in taxes, which can affect disposable income and ultimately consumption, saving, and investment. Therefore, all the given statements are true.

Fiscal Policy Affects Aggregate Demand