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Suppose the president wishes to enact fiscal policies that would generate the most immediate effect on...

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?

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Answer #1

The President should favor increase in government spending . When government spending rises , keeping taxes constant , there is direct effect on aggregate demand . This is because government spending is a component of aggregate demand . If tax is increased then it takes time to take effect since tax alters consumption spending and does not affect AD directly . Most immediate effect would be spending in infrastructure , healthcare , education , social welfare programs etc . This not only boosts the economy but also brings good will before elections .

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