Final answer:
Inflation can be controlled by employing fiscal restraint tools such as Reduction in government spending, Decrease in transfer payments, and Increase in taxes, which shift the AD curve to the left, reducing inflationary pressures in a Keynesian framework.
Step-by-step explanation:
The tools of fiscal restraint necessary to reduce inflation by reducing Aggregate Demand (AD) indeed involve D. All of the above options, which are a Reduction in government spending, a Decrease in transfer payments, and an Increase in taxes. Such measures aim to curb the level of economic activity and reduce the overall demand for goods and services in the economy.
For instance, a tax increase on consumer income will generally lead to a decrease in consumers' discretionary income, which in turn reduces consumption spending. This has the effect of shifting the AD curve toward the left, alleviating inflationary pressures. In a Keynesian framework, this is visualized on an AD/AS diagram where such contractionary fiscal policies move the AD curve from a higher inflationary level (ADi) to a lower, more stable one (ADf), ideally without causing undue increases in unemployment.