When the planned aggregate expenditure is greater than the available output at full employment level, this situation is termed as excess demand. It leads to inflationary gap in the economy. It arises because of increase in money supply due to deficit financing leading to increase in consumption demand or an increase in autonomous investment without the corresponding increase in savings. So, there is a need to reduce the money supply in the economy in order to curb the demand levels in an economy. As the purchasing power will reduce, aggregate demand levels will come down. This can be done both by using monetary and fiscal policy.