In the Taylor Rule Formulation for Setting a Federal Funds

question 2

Multiple Choice

In the Taylor Rule formulation for setting a federal funds target rate, a negative output gap means that the

• A)output in the economy is below the economy's potential output.
• B)output in the economy is above the economy's potential output.
• C)economy is operating at its full employment level.
• D)economy is operating above its full employment level.

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Definitions:

Reflex

An unlearned, involuntary action or movement in response to a stimulus. A reflex occurs without conscious thought.

Cephalocaudal

A principle of development that describes growth and development that begins at the head and progresses downward towards the feet.

Proximodistal

A pattern of development where growth starts at the center of the body and moves towards the extremities.

Experience-Dependent

Brain functions that depend on particular, variable experiences and therefore may or may not develop in a particular infant.