Using the Taylor Rule, If Inflation Is 1 Percent, Desired

question 96

Multiple Choice

Using the Taylor rule, if inflation is 1 percent, desired inflation is 2 percent, and output is 2 percentage points above potential, the Fed should target a federal funds rate of:

• A)6.5.
• B)4.5.
• C)3.5.
• D)3.0.

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Definitions:

Brand Extension

The practice of using an established brand name on a new product category, leveraging the brand's existing reputation and customer base.

Product Category

A broad classification that groups products based on common characteristics or needs.

Product Line Extension

The addition of new products to an existing product line within the same brand, usually to target a different customer segment or fill a gap in the product offering.

New-Product Strategies

The plans and approaches a business undertakes to bring new products to the market effectively.