According to the Taylor Rule, If the Output Gap Rises

question 62

Multiple Choice

According to the Taylor Rule, if the output gap rises by 3% and inflation falls by 1%, then the federal funds rate should

• A) fall by 2%.
• B) fall by 1%.
• C) remain unchanged.
• D) rise by 1%.

Differentiate between short-run and long-run costs in the context of variable and fixed inputs.

Calculate economic profit, incorporating opportunity costs and explicit costs.

Understand the concept of economic profits, including implicit and explicit costs.

Analyze the impact of investments on the reduction of production costs and its effect on economic profits.

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Definitions:

Bilateral Contract

A type of contract that arises when a promise is given in exchange for a promise.

Payment of Funds

The act of transferring money from one party to another as a form of compensation or fulfillment of an obligation.

Moral Obligations

Duties that arise from ethical principles rather than legal requirements.

Promisee

A person to whom a promise is made.