Suppose the Equilibrium Real Interest Rate Is 2 Per Cent

question 86

Multiple Choice

Suppose the equilibrium real interest rate is 2 per cent per year, inflation is 2.5 per cent and the output gap is 1 per cent. Using the Taylor rule, what is the cash rate?

• A)5.25 per cent
• B)3.5 per cent
• C)3 per cent
• D)5.5 per cent

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Definitions:

Control Group

In an experiment, the group not exposed to the treatment; contrasts with the experimental group and serves as a comparison for evaluating the effect of the treatment

Exposure Therapies

Psychological treatments involving repeated exposure to feared stimuli to reduce the fear response.

Client-centered Therapists

Therapists who practice a form of psychotherapy that emphasizes the importance of the therapeutic relationship and the client's potential for self-directed growth.

Nonverbal Behaviors

Forms of communication without the use of spoken language, including gestures, facial expressions, and body language.