To correct a negative GDP gap (where actual GDP is below potential GDP), the government typically needs to stimulate aggregate demand. This can be achieved through various fiscal and monetary policies.
However, if there is a positive GDP gap (where actual GDP exceeds potential GDP and the economy is overheating), the government might indeed aim to shift the aggregate demand curve to the left. This could involve measures such as increasing taxes, reducing government spending, or implementing higher interest rates to cool down demand.
In summary:
- For a negative GDP gap, you shift aggregate demand to the right to stimulate the economy.
- For a positive GDP gap, you shift aggregate demand to the left to reduce economic activity.
If you are referring to correcting a positive GDP gap, then your statement about shifting aggregate demand to the left would be correct. If you meant a negative GDP gap, the opposite adjustment would be necessary.