According to the Taylor Rule,when Inflation And/or Output Is Above

question 31

Multiple Choice

According to the Taylor rule,when inflation and/or output is above its target,then:

• A)the federal funds rate must be negative.
• B)the federal funds rate must be above its target.
• C)the federal funds rate must be above inflation.
• D)none of the above are correct.

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Definitions:

Profit Incentives

Motivations for businesses and individuals to increase their earnings and achieve financial gains, often driving economic activities and innovation.

Market System

(1) An economic system in which individuals own most economic resources and in which markets and prices serve as the dominant coordinating mechanism used to allocate those resources; capitalism. Compare with command system. (2) All the product and resource markets of a market economy and the relationships among them.

Retained Earnings

Profits that a company keeps after dividends are paid out to shareholders, often used for reinvestment in the business or to pay off debt.

Funding of R&D

The financial investment allocated towards research and development activities in order to innovate, enhance product quality, or create new products.