In the hard-landing scenario the ability of the Fed to respond
A) is unlimited
B) is constrained because their inclination to raise interest rates would further compound the value of the dollar problem.
C) is constrained because their inclination to lower interest rates would further compound the value of the dollar problem.
D) limited because the resulting boom would run out of control.
E) is constrained because their inclination to lower taxes would depress tax revenues.

Question

Quizplus · Accepted Answer

In the hard-landing scenario, the Fed's inclination to lower interest rates would further compound the value of the dollar problem, making it a constrained option for them. Lowering interest rates would lead to a decrease in the value of the dollar, negatively impacting the country's ability to import goods and services. Therefore, the Fed's ability to respond is limited by the potential consequences of their actions.

In the Hard-Landing Scenario the Ability of the Fed to Respond