Final answer:
Fiscal policy influences the macroeconomy by affecting consumer spending, business investment, and government expenditure. These changes can alter disposable income, incentivize or discourage business investment, and directly impact economic demand through government spending.
Step-by-step explanation:
The three main ways that fiscal policy affects the macroeconomy are by influencing consumer spending, business investment, and government expenditure. This can be seen as the correct answer to the student's question, which is option B. Fiscal policy, which encompasses government spending and tax policies, plays a crucial role in steering the economy.
Consumer spending is affected by fiscal policy through tax cuts or increases, which leave consumers with more or less disposable income, respectively. Higher disposable income generally leads to increased consumer spending, which can boost economic growth.
Business investment can be influenced by fiscal policy measures such as tax incentives for investment or subsidies. For example, lower corporate tax rates might encourage businesses to invest more in capital, research and development, while higher rates might deter such investments.
Lastly, government expenditure on public services, infrastructure, and welfare programs directly injects money into the economy and can stimulate aggregate demand. Depending on the state of the economy, the government can either increase spending to stimulate growth during a recession or cut back spending to curb inflation during times of excessive growth.