Choose a "story" that best matches the data and the analysis from the model for the years1994 to 1998.(The names of wars and policymakers have been removed so as not to give away the answer to those who know U.S. history.)

a.The effects of a severe recession early in the decade were still being felt at the beginning of this period.Output was less than potential, and financial markets remained pessimistic.As financial markets gained confidence, however, borrowing costs fell for more-risky businesses, which increased investment spending.Tax cuts for households added to consumer spending, and the government increased spending on military purchases.

b.At the beginning of this period the economy was expanding and output approached potential.Then a war helped cause large increases in oil prices, which increased business costs.Businesses cut back on production and passed higher costs to consumers in higher prices, as much as they could.High inflation increased money demand, and financial markets became pessimistic, which further contributed to the economy's problems.

c.The effects of recession early in the decade had faded by the beginning of this period.Rapid technological advance helped cause steady growth in output.These new technologies along with falling oil prices caused inflation to decrease, even though output rose above potential.Financial markets were optimistic throughout this period.They increased lending enough to hold interest rates stable despite rising incomes.

d.At the beginning of this period the U.S. President decided to expand Federal social spending and fight a war against U.S. enemies at the same time. A large tax reduction that had been proposed by a previous President took effect.After that, consumer and government spending increased rapidly.Financial markets were generally optimistic, but increasing demand for money raised borrowing costs, especially for more-risky businesses.