Contractionary fiscal policies used to reduce the deficit in the 1990s did not hurt the economy because fiscal and monetary policies were well coordinated at that time.

Question

Quizplus · Accepted Answer

During the 1990s, the government used contractionary fiscal policies to reduce the deficit, but this was done in coordination with the Federal Reserve implementing expansionary monetary policies such as decreasing interest rates. This coordination helped to mitigate the negative effects of the contractionary fiscal policies on the economy.

Contractionary Fiscal Policies Used to Reduce the Deficit in the 1990s