According to the Taylor Rule ________

question 11

Multiple Choice

According to the Taylor rule ________.

• A)expectations are formed in an adaptive fashion
• B)the central bank should set its federal funds rate target by a formula that puts weight on both output and inflation gaps
• C)a constant growth rate rule for money should be adopted
• D)expectations should be formed consistent with the model of rational expectations

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Definitions:

Price Floor

A government- or authority-imposed minimum price that can be charged for a good or service to prevent prices from dropping too low.

Equilibrium Price

The price at which the quantity of a good or service demanded by buyers equals the quantity supplied by sellers.

Rationing Mechanism

A system designed to allocate goods or services among interested users, often used when demand exceeds supply.

Discrimination

The unjust or prejudicial treatment of different categories of people or things, especially on the grounds of race, age, or sex.