Final answer:
Inflation in the AD/AS model occurs when aggregate demand continues to shift to the right, pushing the macroeconomic equilibrium into the AS curve's steep portion. To alleviate inflation, decreasing government spending or implementing supply-side policies can be appropriate fiscal policy measures.
Step-by-step explanation:
In the AD/AS model, inflation can arise when aggregate demand continues to shift to the right when the economy is already at or near potential GDP and full employment. This pushes the macroeconomic equilibrium into the AS curve's steep portion, resulting in a higher price level. The AD/AS diagram shows a one-time shift in the price level, but does not address what would cause inflation to sustain itself over time.
To alleviate inflation, the most appropriate fiscal policy would be to decrease government spending. This would shift the aggregate demand curve to the left, reducing the pressure on prices. Another option would be to implement supply-side policies that increase the economy's capacity to produce goods and services, thereby reducing the upward pressure on prices.
It is important to note that these are just general suggestions and the specific fiscal policy measures would depend on the specific circumstances of the economy.