According to the Taylor Rule, If the Target Rate of Inflation

question 382

Multiple Choice

According to the Taylor rule, if the target rate of inflation for the Fed is 2 percent and inflation rises to 3 percent at full unemployment, then the Fed should

• A) raise the real federal funds rate by one percentage point.
• B) lower the real federal funds rate by one percentage point.
• C) raise their targeted interest rate by half of a percentage point.
• D) lower their targeted interest rate by half of a percentage point.

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