According to the Taylor Rule,the Fed Should Raise the Federal

question 69

Multiple Choice

According to the Taylor rule,the Fed should raise the federal funds interest rate when inflation ________ the Fed's inflation target or when real GDP ________ the Fed's output target.

• A)rises above;drops below
• B)drops below;drops below
• C)rises above;rises above
• D)drops below;rises above

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Definitions:

Marginal Analysis

An examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.

Maximize Profits

The process by which businesses aim to achieve the highest possible profit through revenue maximization and/or cost minimization strategies.

Minimize Losses

Minimize losses refers to strategies or actions taken by businesses and investors to reduce financial losses or the negative impact of less successful investments.

Marginal Cost (MC)

The cost of producing one additional unit of output.