A Monetary Policymaker Using a Taylor Rule Could Cause Persistently

question 25

Multiple Choice

A monetary policymaker using a Taylor Rule could cause persistently increasing inflation if

• A) the estimate of the equilibrium real federal funds rate is too high.
• B) the inflation target is too high.
• C) the estimate of potential GDP is too high.
• D) all of the above.

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Definitions:

Maximum Number

The highest value in a given set or range.

Matter

Anything that occupies space.

Mass

A property of physical objects that measures the amount of matter in an object, affecting its resistance to acceleration under a force.

Occupies Space

A characteristic of matter that refers to the requirement of physical space for an object or substance to exist.