If Real GDP Is 2 Percent Below Potential GDP and the Inflation

question 182

Multiple Choice

If real GDP is 2 percent below potential GDP and the inflation rate is 1 percent, then according to the Taylor rule, the Fed should make the real federal funds rate

• A)decrease by 1.5 percent.
• B)decrease by 3 percent.
• C)increase by 3 percent.
• D)decrease by 1 percent.