Fiscal policy influences aggregate demand from "summary" of Principles of Economics by Saifedean Ammous
Fiscal policy refers to the government's decisions on taxation and spending that are aimed at influencing the economy. By adjusting tax rates and government spending levels, policymakers can affect the overall level of economic activity in the country. One of the key ways in which fiscal policy impacts the economy is through its effect on aggregate demand. Aggregate demand represents the total amount of goods and services that households, businesses, and the government are willing and able to purchase at a given price level. Changes in fiscal policy can directly impact aggregate demand by altering the disposable income of households and the purchasing power of businesses and the government. For example, if the government decides to reduce taxes, households will have more disposable income available to spend on goods and ...
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