In the short run, fiscal policy has its primary affect on aggregate demand but in the long run fiscal policy can influence saving, investment and economic growth.

Question

Quizplus · Accepted Answer

In the short run, fiscal policy can affect aggregate demand through changes in government spending and taxes. In the long run, fiscal policy can also influence saving and investment through changes in government deficits and debt, which can impact interest rates, and ultimately economic growth.

In the Short Run, Fiscal Policy Has Its Primary Affect