The 1960s recession was contributed by which combination of factors?

The 1960s recession was contributed by which combination of factors?

• A. A rapid expansion of the automobile sector and loose monetary policy
• B. Slowdown in the automotive industry and tight monetary policy
• C. A large trade surplus and expansionary fiscal policy
• D. A strong dollar and booming manufacturing

Answer: (B)

The main idea is how policy shifts and a key industry can work together to slow the economy. In the late 1960s, inflation pressures from high spending led the Federal Reserve to tighten monetary policy, raising interest rates and making borrowing more expensive. At the same time, the automotive industry slowed down, reducing demand for durable goods and signaling broader weakness in manufacturing. Since autos were a large part of GDP, this industry slowdown amplified the impact of the restrictive monetary stance, helping push the economy into a recession. The other scenarios describe conditions that would tend to support growth or don’t align with the downturn in that period.

The main idea is how policy shifts and a key industry can work together to slow the economy. In the late 1960s, inflation pressures from high spending led the Federal Reserve to tighten monetary policy, raising interest rates and making borrowing more expensive. At the same time, the automotive industry slowed down, reducing demand for durable goods and signaling broader weakness in manufacturing. Since autos were a large part of GDP, this industry slowdown amplified the impact of the restrictive monetary stance, helping push the economy into a recession. The other scenarios describe conditions that would tend to support growth or don’t align with the downturn in that period.