Using the Taylor Rule,if the Current Inflation Rate Equals the Target

question 76

Multiple Choice

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

• A)will be greater than
• B)will be less than
• C)will be the same as
• D)may be greater than or less than

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Definitions:

Held Up

Delayed or stopped by something or someone, causing a pause in progress or movement.

Average Variable Costs

The total variable costs (costs that change with output level) divided by the quantity of output produced.

Average Costs

The total cost of production divided by the number of goods produced, a measure of cost efficiency.

Shutting-Down

A short-term decision by a firm to cease operations while it still has the option to resume in the future, often due to unfavorable market conditions.