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How has China's fiscal policy for 2018 affected its aggregate demand in the first quarter and...

How has China's fiscal policy for 2018 affected its aggregate demand in the first quarter and how is it likely to affect it in the coming months? Please explain using graphs. Thanks !!!!

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Answer #1

The current Chinese policy of proactive fiscal policy will shift the aggregate demand curve of the economy rightwards which will lead to increase in the price level and increase in the level of real GDP of the economy. In the coming months also, the expansionary fiscal policy of the government will shift the aggregate demand curve rightwards and thus price level and real GDP of the economy will increase. This can be depicted in the graph below

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