Question

Suppose the president wishes to enact fiscal policies that would generate the most immediate effect on the economy and thus improve his chances of reelection. What type of policies would he tend to favor and why?

Answer 1

Expansionary fiscal policy which raises government spending and reduce tax which raise disposable income in society to spend on goods. It will raise aggregate demand in short run but it result in higher inflation because price rises from P to P1 which will become an agenda for opposite parties to address the nation against president.

If President can take care of supply side economics which also raises supply of goods when demand rises such that there is only effect on output level which rises from Q to Q2 and price remains at its original position of P.