Question

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