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Explain how the government can use fiscal policy instruments to close deflationary gap.

Explain how the government can use fiscal policy instruments to close deflationary gap.

Answers

Joseph
1. By reducing government spending; this will reduce income in the economy thus reduce aggregate demand leading to closure of the deflationary gap
2.increasing taxes ; this will reduce consumer spending and in return reduce aggregate demand which will lead to closure of the deflationary gap
Erwoti answered the question on June 22, 2018 at 22:05

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