Deficit trade balance hinders the Federal Reserve's ability to combat a recession by lowering interest rates.

Question

Quizplus · Accepted Answer

A deficit trade balance implies that a country is importing more goods and services than it is exporting. This leads to a decrease in the demand for the country's currency, making it difficult for the Federal Reserve to lower interest rates. Lowering interest rates would further decrease the demand for the currency and worsen the trade balance deficit, leading to inflation and other economic problems. Thus, deficit trade balance hinders the Federal Reserve's ability to combat a recession by lowering interest rates.

Deficit Trade Balance Hinders the Federal Reserve's Ability to Combat