To combat demand-pull inflation, fiscal policy would cut government expenditures and/or raise taxes, which causes the government's budget to move into a deficit.

Question

Quizplus · Accepted Answer

To combat demand-pull inflation, fiscal policy would indeed cut government expenditures and/or raise taxes, but this would lead to a reduction in the budget deficit or an increase in the budget surplus, not a move into a deficit.

To Combat Demand-Pull Inflation, Fiscal Policy Would Cut Government Expenditures