According to the Taylor Rule, If Inflation Equals 3 Percent

question 79

Multiple Choice

According to the Taylor rule, if inflation equals 3 percent and there is an expansionary gap equal to 3 percent of potential output, the Fed will set a real interest rate of ________ percent and a nominal interest rate of ________ percent.

• A)4; 7
• B)1; 4
• C)1; 3
• D)4; 6

---

Definitions:

Preconventional Morality

The first level of Kohlberg's theory of moral development, where moral understanding is based on rewards, punishment, and personal self-interest.

Babinski Reflex

A reflex action in which the big toe remains extended or extends itself when the sole of the foot is stimulated, indicative of abnormalities in the central nervous system.

Moro Reflex

An infantile reflex triggered by a sudden loss of support, where the infant feels as if it is falling, manifesting in spreading arms, pulling arms in, and crying.

Palmar Reflex

An involuntary movement where babies close their fingers in a grasp when their palm is touched.