Fiscal policy works principally through shifts of the aggregate demand curve.
The federal government's tax and spending powers give it a great deal of influence over aggregate demand.The government can alter aggregate demand by purchasing more or fewer goods and services,raising or lowering taxes,and changing the level of income transfers.

Question

Quizplus · Accepted Answer

Fiscal policy involves changes in government spending, taxes, and transfers, all of which can impact aggregate demand and cause shifts in the AD curve. Therefore, the statement that fiscal policy works principally through shifts of the aggregate demand curve is true.

Fiscal Policy Works Principally Through Shifts of the Aggregate Demand