Problem
If the Federal Reserve Bank has an expansionary monetary policy to help a U.S. economy that is in a deep recession and if you see most economic indicators like the Unemployment Rate, Leading Index of Economic Indicators, the Manufacturing Survey, Consumer Sentiment, and the NFIB Index for Small Business getting worse and worse, then what is happening to the prices of mortgage-backed securities (MBS) instruments?
i. The prices of mortgage-backed securities are very stable and don't change much.
ii. The prices of mortgage-backed securities will go down like everything else.
iii. The prices of mortgage-backed securities will go up in this situation.
iv. No one can predict the price trends of mortgage-backed securities using Fed policy and economic indicators. It is a wild game of chance.