Suppose the economy has a recessionary gap. By using an expansionary fiscal policy, the Federal Government can close this gap by Suppose the economy has a recessionary gap. By using an expansionary fiscal policy, the Federal Government can close this gap by increasing government spending and taxes in order to both increase aggregate demand and aggregate supply increasing government spending in order to increase aggregate demand. decreasing government spending in order to increase aggregate supply. reducing taxes in order to stimulate investment, and thus increase aggregate supply