Suppose a major war in the Middle East cuts off the supply of oil to the United States, causing a recession and inflation. With the tools of monetary policy, the Federal Reserve

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Quizplus · Accepted Answer

The Federal Reserve can use monetary policy to address either recession or inflation, but not both simultaneously. Lowering interest rates can stimulate economic activity to combat recession, while raising rates can help control inflation. However, these actions have opposite effects, making it challenging to address both issues at the same time with monetary policy alone.

Suppose a Major War in the Middle East Cuts Off