Since the U.S.economy expanded rapidly from 1992 to 2000,it must be t that
A) fiscal contraction overwhelmed monetary expansion.
B) monetary expansion overwhelmed fiscal contraction.
C) monetary expansion exactly offset fiscal contraction.
D) monetary contraction overwhelmed fiscal expansion.

Question

Quizplus · Accepted Answer

The statement suggests that the U.S. economy grew rapidly during 1992-2000, implying that there was an increase in economic activity during this period. As the economy grows, the central bank typically implements loose monetary policy to encourage spending and borrowing, while the government may try to reduce spending or increase taxes to avoid overheating the economy. Therefore, the most plausible explanation is that monetary expansion overwhelmed fiscal contraction, i.e., the Federal Reserve's loose monetary policy offset the government's efforts to reduce spending or increase taxes.