Since the U.S.economy expanded rapidly from 1992 to 2000, it must be true 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 U.S. economy expanded rapidly from 1992 to 2000, which implies that the overall effect of the macroeconomic policies during this period was expansionary. Since fiscal contraction and monetary expansion have opposite effects on the economy, it is unlikely that fiscal contraction overwhelmed monetary expansion (choice A) or that monetary contraction overwhelmed fiscal expansion (choice D). Also, it is unlikely that fiscal contraction exactly offset monetary expansion (choice C), as that would result in no net effect on the economy. Therefore, choice B is the best option, suggesting that monetary expansion overwhelmed fiscal contraction during this period.