Answer:
1. Raising taxes or reducing government spending - 2. Raising taxes - 3. Cut Government Spending - 4. Could end in recession
Explanation:
Demand-pull inflation means that the inflation is cause for increases in the Aggregate Demand. To combat it with fiscal policies, the usual es to reduce the Aggregate Demand (AD). To raise taxes will decrease consumption therefore reducing the AD. To decrease the government spending will decrease AD. If you want to keep the size of the government and reduce AD, then raise taxes and keep government spending as it is. If you want to reduce the public sector, then decrease the government spending.
Ratchet effect means that when something kicks off, the effects starts to act and it's difficult to stop it or to reverse it. So if you reduce AD, even if it's a little, the whole economy can be reduced even more than expected and end up reducing economy, therefore leading the GDP not to grow or even to a recession.
