According to the Taylor Rule, If the Current Inflation Rate

question 25

Multiple Choice

According to the Taylor rule, if the current inflation rate is 5 percent and the current unemployment rate is 3.8 percent, the Fed's targeted interest rate should be

• A) 5 percent.
• B) 8.8 percent.
• C) 1.2 percent.
• D) 9 percent.

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Definitions:

Variable Costs

Outlays that shift in tandem with the quantity of goods produced.

Long Run

A period sufficient for all inputs and production processes to be adjusted, including changing the scale of production facilities.

Average Fixed Costs

Average Fixed Costs are the total fixed costs of production divided by the quantity of output produced.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or output in the short run, such as rent or salaries.