Price level AD 3 A D 1 A D RealGDP 11. Refer to the above diagram. The economy is at equilibrium at point A. What fiscal policy would be most appropriate to control demand-pull inflation? A) decrease aggregate demand by increasing taxes increase aggregate demand by decreasing taxes decrease aggregate supply by increasing taxes increase aggregate demand by increasing government spending 12. Refer to the above diagram. The economy is at equilibrium at point C. What fiscal policy would increase real GDP? Increase aggregate demand from AD, to AD, by decreasing taxes decrease aggregate demand from AD, to AD; by increasing taxes increase aggregate demand from AD, to AD, by increasing government spending make no change because the economy is at or near its full-employment level of real output