If there is an inflationary gap in the economy, discretionary fiscal policy would likely involve Jan action to

Question

Quizplus · Accepted Answer

To correct an inflationary gap, discretionary fiscal policy would involve shifting the aggregate demand curve to the left. This can be done through measures such as decreasing government spending or increasing taxes, which would decrease overall spending in the economy and reduce demand-pull inflation. Shifting both the aggregate demand and supply curves to the right (Option C) would be appropriate for addressing a recessionary gap.

If There Is an Inflationary Gap in the Economy, Discretionary