The impact of fiscal stimulus on aggregate demand includes both new government spending and all subsequent induced increases in consumer spending triggered by the initial government outlays.
Fiscal stimulus will set off the multiplier process.As a result of this,aggregate demand will increase (shift)in two distinct steps: (1)the initial fiscal stimulus and (2)induced changes in consumption.

Question

Quizplus · Accepted Answer

Fiscal stimulus does set off the multiplier process, leading to both initial government spending and subsequent induced increases in consumer spending, ultimately increasing aggregate demand in two steps.

The Impact of Fiscal Stimulus on Aggregate Demand Includes Both