If the Actual Federal Funds Rate Is Substantially Above the Appropriate

question 15

Multiple Choice

If the actual federal funds rate is substantially above the appropriate rate implied by the Taylor rule, this indicates that

• A)monetary policy is overly expansionary and a shift toward a more restrictive policy would be appropriate.
• B)monetary policy is too restrictive and a shift to a more expansionary policy would be appropriate.
• C)monetary policy is unable to influence interest rates, and therefore it is unable to influence either output or prices.
• D)current monetary policy is on target and no policy shifts should be made.

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