The effects of fiscal policy work through aggregate supply.

Question

Quizplus · Accepted Answer

The effects of fiscal policy work through aggregate demand, not aggregate supply. Fiscal policy refers to changes in government spending and taxation that can influence the overall level of economic activity, and these changes typically affect demand for goods and services in the economy. By contrast, aggregate supply refers to the total amount of goods and services that firms are willing and able to produce at a given price level, and this is largely determined by factors such as technology, resources, and production costs.

The Effects of Fiscal Policy Work Through Aggregate Supply