If the economy has an inflationary GDP gap,one possible solution is to increase government expenditures.
Fiscal restraint is tax hikes or spending cuts intended to reduce (shift)aggregate demand.

Question

Quizplus · Accepted Answer

Increasing government expenditures would actually increase aggregate demand, not reduce it, which is not a solution for an inflationary GDP gap. Fiscal restraint involves reducing aggregate demand through tax hikes or spending cuts.

If the Economy Has an Inflationary GDP Gap,one Possible Solution