According to the Taylor Rule, When Real GDP Is Equal

question 110

Multiple Choice

According to the Taylor rule, when real GDP is equal to potential GDP and the inflation rate is equal to its target rate of 2 percent, the Federal funds rate should be

• A)2 percent, and this implies a real interest rate of 0 percent.
• B)2 percent, and this implies a real interest rate of 4 percent.
• C)4 percent, and this implies a real interest rate of 2 percent.
• D)4 percent, and this implies a real interest rate of 4 percent.

---

Definitions:

Cost of Goods Sold

Expenses specifically related to producing the items that a business markets and sells.

Balance Sheet

This report presents a summary of a firm's financial status by listing its resources, debts, and the equity held by investors on a certain date.

Spreadsheet

A digital tool or program that allows users to organize, calculate, and analyze data across a grid of rows and columns.

Job-Order Costing

An accounting system used to ascertain costs for each job or project separately, often used in manufacturing or service industries where each job is different.