Concept:A deflationary gap occurs when aggregate demand is too low to achieve full employment.
It is closed by expansionary monetary and fiscal policies that boost demand.
Explanation:Increased interest rates make borrowing more expensive.
This reduces consumer spending and business investment.
It contracts aggregate demand instead of expanding it.
Therefore, an increased interest rate widens, not closes, the deflationary gap.
Expansionary measures include increasing money supply, raising government expenditure, and reducing taxes.
Answer:A. Increased interest rate