Final answer:
Implementing contractionary fiscal policy is not an effective way at eliminating a recessionary gap as it would decrease aggregate demand possibly worsening the recession. Expansionary fiscal and monetary policies are correct approaches.
Step-by-step explanation:
The question addresses economic policies that can be utilized to eliminate a recessionary gap, which is when an economy's actual gross domestic product (GDP) is lower than its potential GDP. An effective method for closing a recessionary gap would be to implement expansionary fiscal policy, which includes increasing government spending, decreasing taxes, or both—these measures aim to stimulate economic activity and increase aggregate demand. Additionally, reducing interest rates through expansionary monetary policy can also help in eliminating a recessionary gap by encouraging borrowing and investing.
In contrast, implementing contractionary fiscal policy is not an effective measure for addressing a recessionary gap, as it involves cuts in government spending or increases in taxes, which reduce aggregate demand and can lead to a deeper recession. Therefore, the answer to the question is D) Implementing contractionary fiscal policy.