The Taylor Rule Can Be Written as FF Rate =

question 8

Multiple Choice

The Taylor rule can be written as FF rate = π + 2.0 + 0.5(π - 2.0) + 0.5(GDP gap) , where FF rate is the nominal federal funds rate, π is the inflation rate, and the GDP gap is the percentage deviation of real GDP from its natural level. If inflation is 4 percent and the GDP gap is 2 percent, then according to the Taylor rule, the Fed should set the nominal federal funds rate at percent.

• A)4
• B)8
• C)10
• D)12

---

Definitions:

Purchases

Transactions involving the acquisition of goods or services for personal use, resale, or business operations.

Voucher Register

A record or log of vouchers that have been prepared, detailing the authorization of transactions and payments.

Liability

An obligation of the company arising from past transactions or events, the settlement of which may result in the transfer of assets, provision of services, or other yielding of economic benefits in the future.

Accounts Payable

Liabilities representing amounts the company owes to suppliers or creditors for goods and services received but not yet paid for.