Prior to World War I
A) fiscal policy was the major stabilization policy in the United States.
B) monetary policy was the major stabilization policy in the United States.
C) neither fiscal nor monetary policy were feasible as stabilization policy in the United States.
D) fiscal and monetary policy worked together to be effective stabilization policies in the United States.

Question

Quizplus · Accepted Answer

Prior to World War I, the concepts and tools of fiscal and monetary policy as we understand them today were not developed or used in a systematic way to stabilize the economy in the United States. The government did not actively use fiscal policy (government spending and taxation) to manage economic fluctuations, and the Federal Reserve, which plays a key role in implementing monetary policy, was only established in 1913, just before the war.