Business Finance
The actions by the government using fiscal policy

Question Description

When the economy is in a recessionary mode, what will likely be the actions by government using fiscal policy?

Is it better to concentrate on aggregate demand or aggregate supply? Why?

Final Answer

Fiscal policy is necessary when the economy is in recessionary mode. Even in a capital society. It only makes sense to focus on demand. If you have 100 ipads, but no one has any money to buy ipads, although supply may be high, demand will remain low. And demand will stay low until the economy turns back around in the other direction. Fiscal policy, well this helps to turn the economy back around, using various methods and cutting taxes, increasing taxes, and creating new programs that help make the country more money. In order to stimulate demand. It's better to concentrate on demand, after the fact you get the economy more stable. Hope this helps kiddo.

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