The Taylor Rule Relates

question 6

Multiple Choice

The Taylor rule relates

• A)the nominal Fed funds rate to inflation over the past year and the deviation of output from full-employment output.
• B)the growth rate of the monetary base to the growth rate of nominal GDP and the change in velocity over the past year.
• C)the nominal Fed funds rate to the growth rate of nominal GDP and the change in velocity over the past year.
• D)the growth rate of the monetary base to inflation over the past year and the deviation of output from full-employment output.

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Definitions:

Point Q

A hypothetical point used in economic models or graphs to represent a specific position in terms of quantity or quality.

Economy

A framework for creating, distributing, and utilizing goods and services in a specific geographic region.

Economic Growth

A boost in the purchasing power adjusted market value of goods and services an economy creates over time.

Long Run

A period in economics sufficient for all markets to adjust, including production facilities and labor.