Using the Taylor Rule, If Inflation Is 3 Percent, Desired

question 216

Multiple Choice

Using the Taylor rule, if inflation is 3 percent, desired inflation is 2 percent, and output is 2 percentage points below 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:

Force Field Analysis

A management technique developed by Kurt Lewin to analyze the forces for and against a change to determine the feasibility of implementing it.

Equilibrium

A state of balance or stability within a system, achieved when opposing forces or influences are equal.

Positional Power

The authority and influence bestowed upon individuals because of their rank or position within an organization, enabling them to exert control over others.

Monetary Rewards

Financial incentives given as recognition for an individual's or group's achievements, serving as motivation for continued performance or behavior.