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:

Heredity

The genetic transmission of characteristics from parents to offspring.

Psychoticism

A personality pattern typified by aggressiveness, impersonality, impulsivity, and a lack of empathy, often associated with the risk for developing psychotic disorders.

Impulse Control

The ability to resist or delay an impulse, drive, or temptation to act and involves self-regulation and self-control.

Erg

In psychology, often related to the concept of ergs as basic human drives or motivations.