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:

Experiential Avoidance

A psychological concept involving the attempt to avoid thoughts, feelings, memories, physical sensations, and other internal experiences even when doing so causes harm.

Poor Emotional Regulation

The inability to manage and respond to emotional experiences in a healthy, adaptive manner.

Client-Centered Therapy

A form of psychotherapy developed by Carl Rogers, focusing on providing a supportive environment that allows the client to lead the therapeutic process.

Reflection

Method of responding in which a therapist expresses his or her attempt to understand what the client is experiencing and trying to communicate.