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.

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Definitions:

Valid Constraints

Restrictions or conditions that are applicable and necessary in mathematical problems or models.

Linear Programming

A mathematical method used in operations research to find the best possible solution to a problem within given constraints.

Product-Mix

The variety of different products and services a company offers to its customers.

Limited Resources

The finite availability of inputs such as time, money, labor, and materials, which restricts the ability to meet demand or achieve certain objectives.