Suppose Government Deficits Increase Such That Real Interest Rates Rise

question 14

Multiple Choice

Suppose government deficits increase such that real interest rates rise by 1.5 percentage points. According to the Taylor rule, if inflation targets remain unchanged, then nominal interest rates should rise by

• A) less than 1 percent.
• B) between 1 and 1.5 percent.
• C) exactly 1.5 percent.
• D) between 1.5 and 2 percent.
• E) more than 2 percent.

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Definitions:

Self-Directed Interventions

Personal initiatives or strategies designed to change behavior, improve health, or achieve self-improvement without direct supervision from others.

Pessimistic Thoughts

Negative thoughts focused on anticipating undesirable outcomes or emphasizing the worst aspects of a situation.

Optimistic People

Individuals who tend to maintain a positive outlook on life, expecting positive outcomes even in challenging situations.

Proactive Coping Skills

Strategies employed to prevent or handle future stressors and challenges with foresight and planning.