When an agent relies on external APIs, transient failures like network timeouts or rate limiting are common. "Retry with exponential backoff" is a standard resiliency pattern that handles these temporary issues by retrying the request after a progressively longer waiting period, preventing system overload. "Fallback tool or cached response path" provides an alternative course of action if the primary API is unavailable. This ensures the agent can still provide a useful (even if degraded) response, maintaining operational continuity. Together, these methods create a robust and fault-tolerant system.

C. Permanent failure after the first timeout is brittle and lacks fault tolerance, making the system unreliable.

D. Infinite looping is a critical bug that consumes resources and never resolves the issue, degrading system performance.

E. Manual restart is not a scalable or automated solution for resiliency and introduces significant operational delays.

1. Google Cloud. (2023). Cloud Architecture Center: Retries with backoff. "Implementing exponential backoff is a common strategy for handling these errors... This increases the reliability of the application." (Section: "Implementing exponential backoff")

2. Microsoft Azure. (2023). Retry pattern - Cloud Design Patterns. "The application can retry the operation in the expectation that the fault is transient... Use an exponential backoff strategy to allow a service time to recover." (Section: "Context and problem")

3. Amazon Web Services. (2022). Fault Isolation and Resiliency. "Implement fallbacks. For any critical dependency, make sure you have a fallback. For example, if a primary data source is unavailable, you can fall back to a cached or replicated copy." (Section: "Implement fallbacks")