To reduce a national deficit, governments canincrease taxationto generate more revenue. This measure, combined with controlled spending, helps reduce the shortfall between revenues and expenditures.
B. Increase government spending: This would increase the deficit further unless matched by revenue increases.
C. Decrease taxation: This would reduce revenue and worsen the deficit.
D. Increase interest rates: This impacts monetary policy and borrowing costs but does not directly reduce a fiscal deficit.
[Reference:CSC Volume 1, Chapter 5, "Fiscal Policy – Addressing Budget Deficits" discusses how governments use taxation to manage deficits​., ]
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