Which action can be taken by the government to cause a leftward shift in aggregate demand and eliminate the inflationary gap?

Question

Multiple choice question.

Decrease price level

Decrease spending

Increase price level

Increase spending

Answer 1

To cause a leftward shift in aggregate demand and eliminate the inflationary gap, the government can take the action of decrease spending. By reducing government spending, aggregate demand will decrease, helping to address inflationary pressures.