Suppose That the Inflation Rate Is 3 Percent and the Output

question 21

Multiple Choice

Suppose that the inflation rate is 3 percent and the output gap is -1 percent. Assuming that the equilibrium real interest rate is 2 percent, what target should the Fed set for the federal funds rate, if the Taylor rule is used?

• A) 5 percent
• B) 6 percent
• C) 4 percent
• D) 1 percent

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Definitions:

Ventral Auditory Pathway

A pathway in the brain involved in processing the aspects of sound related to meaning and speech comprehension.

Visual Cortex

The region within the occipital lobe of the cerebral cortex responsible for interpreting visual data.

Planum Temporale

A region of the brain involved in processing language and situated within the temporal lobe.

Heschl's Gyrus

A region of the brain located in the temporal lobe, critical for processing auditory information.