What does fiscal policy primarily affect in the long run and the short run, respectively?
A)aggregate demand in the long run; aggregate supply in the short run
B)aggregate supply in the long run; saving, investment, and growth in the short run
C)saving, investment, and growth in the long run; aggregate demand in the short run
D)saving, investment, and growth in the long run; aggregate supply in the short run

Question

Quizplus · Accepted Answer

Fiscal policy primarily affects aggregate demand in the short run by influencing consumption and investment through government spending and taxation. In the long run, it affects saving, investment, and growth by influencing the economy's capacity to produce goods and services.

What Does Fiscal Policy Primarily Affect in the Long Run