According to the Taylor Rule,the Fed Should Set the Target

question 151

Multiple Choice

According to the Taylor rule,the Fed should set the target for the federal funds rate equal to the sum of the equilibrium real federal funds rate,the current inflation rate,one-half times the ________,and one-half times the ________.

• A)interest rate gap; inflation gap
• B)interest rate gap; output gap
• C)inflation gap; output gap
• D)unemployment gap; government-spending gap

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