The slow pace of economic recovery had Fed officials
considering additional stimulus measures in
mid-2012, but as a Wall Street Journal article reported,
“The Fed is once again finding itself in a
difficult spot. Officials aren’t yet sure if the recent
slowdown in growth is transitory or permanent.”
Explain why it is important for the Fed to understand
if an economic slowdown is transitory or
permanent when considering stimulus measures
and how misreading the situation could create
additional problems for the economy.