According to the Taylor Rule,if Output Is Above Its Full-Employment

question 87

Multiple Choice

According to the Taylor rule,if output is above its full-employment level and inflation is less than 2%

• A)the Fed should raise the Fed funds rate above 4%.
• B)the Fed should reduce the Fed funds rate below 4%.
• C)the Fed should make the Fed funds rate exactly 4%.
• D)what the Fed should do is ambiguous.

---

Definitions:

Marginal Tax Rates

The rate at which an additional dollar of income would be taxed, which varies based on income levels and is a fundamental component of progressive tax systems.

Average Tax Rates

The ratio of the total amount of taxes paid to the total tax base (taxable income or spending), indicating the percentage of income that goes to taxes.

Unemployment Compensation

Financial payments made to individuals who have lost their job through no fault of their own, intended to provide a temporary source of income.

Regressive Tax

A tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases, disproportionately affecting those with lower incomes.