If the economy is experiencing an inflationary gap and the government wants to speed up the adjustment to full employment,the government should

Question

Quizplus · Accepted Answer

To speed up the adjustment to full employment, the government needs to reduce aggregate demand, which can be achieved by cutting spending or raising taxes. This approach will reduce demand-pull inflationary pressures and help the economy move closer to full employment. A and B will reduce aggregate supply, which is not the goal when the economy is experiencing an inflationary gap. Option C is incorrect as increasing spending or cutting taxes will further increase demand and lead to more inflationary pressures.

If the Economy Is Experiencing an Inflationary Gap and the Government