Respuesta :
Answer:
Aggregate demand (AD) refers to the total demand for goods and services in an economy in an economy at a given price level.
Components of Aggregate Demand (AD); Consumption (C), Investment (I), Government Spending (G) and Net Exports (X-M).
During the recession, the government can affect aggregate demand by increasing their fiscal expenditures and reduce taxation which is known as Fiscal policy.
Expansionary fiscal policy affects aggregate demand through an increase in government spending and a reduction in taxation. Those factors influence employment and increase household income, which then impacts consumer spending and investment
Fiscal policy determines government spending and tax rates. Expansionary fiscal policy, usually enacted in response to recessions or employment shocks, increases government spending in areas such as infrastructure, education, and unemployment benefits.
Explanation:
The govt. has two levers when setting fiscal policy:
1. By Changing the level of spending in various sectors of the economy.
2. And Changes the level and composition of taxation.
- In contractionary fiscal policy, the govt. collects more money through taxes than it spends. This is great policy works and amazingly in times of economic booms. when slows the pace of strong economic growth and puts a check on inflation.
- In an expansionary govt. spends more money than it collects through taxes. And the type of policy is used during recessions to build a foundation for strong economic growth
- fiscal policy: is Govt. policy that attempts to influence the direction of the economy by the changes in government spending.
- Thus, helps to learn that aggregate demand for an economy is divided into four components such as consumption, investment, net exports, and government spending
- change these components will cause the aggregate demand curve to shift to another curve. I attached a diagram.
Learn more about:
https://brainly.com/question/14214258
