Which of the following policies should be used to close an inflationary GDP gap?

A) Increases in government spending and increases in transfer payments
B) Tax increases
C) Increases in government spending
D) Increases in transfer payments

Inflationary GDP Gap

A situation where actual gross domestic product exceeds the potential GDP, leading to upward pressure on prices and inflation.

Government Spending

The total expenditure by the government on goods and services, including salaries of public servants, public investments, and social services.

Tax Increases

A rise in the rate of taxes imposed by governments on individuals or businesses.