Using the Taylor Rule, If the Current Inflation Rate Equals

question 141

Multiple Choice

Using the Taylor rule, if the current inflation rate equals the target inflation rate and real GDP equals potential GDP, then the overnight interest rate target rate equals the

• A)current discount rate.
• B)current inflation rate.
• C)equilibrium real overnight interest rate.
• D)current inflation rate plus the real equilibrium overnight interest rate.
• E)current unemployment minus the natural rate of unemployment.

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Definitions:

Paradox Of Voting

A situation in rational-choice theory where individual votes have little impact on the outcome, yet people still participate in elections.

Median-Voter Model

A political theory suggesting that the outcome of majority rule voting systems will represent the preferences of the median voter.

Public Good

A good that is non-excludable and non-rivalrous, meaning it can be enjoyed by all members of society without reducing its availability to others.

Majority Vote

A decision rule that selects alternatives which have a majority, that is, more than half the votes.