It’s Possible the US Can Dodge a Recession But Stagflation is Unavoidable

Stagflation represents the worst nightmare for the Fed. It puts the two parts of its mandate—full employment and stable prices—into direct conflict. The Fed will have a tough decision to make to control stagflation.—markets.businessinsider.com

Answer the following questions to check your understanding of the story.

Can the Fed “dodge a recession” but still experience stagflation?

The Fed ______________ “dodge a recession” but still experience stagflation because _____________.

a) can; a recession never occurs with inflation

b) cannot; a recession always occurs with inflation

c) can; a recession is easier to avoid than stagflation

d) cannot; stagflation is a combination of recession and inflation

Why does the Fed have a “tough decision” when the economy is experiencing stagflation?

The Fed has a “tough decision” when the economy is experiencing stagflation because it must ______________ to avoid inflation, and ______________ to avoid recession.

a) lower the interest rate; lower the interest rate even more

b) lower the interest rate; raise the interest rate

c) raise the interest rate; lower the interest rate

d) raise the interest rate; raise the interest rate even more

It’s Possible the US Can Dodge a Recession But Stagflation is Unavoidable

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