According to the Taylor Rule

question 307

Multiple Choice

According to the Taylor rule,

• A)if real GDP rises by 2 percent above potential GDP, the Fed should raise the real federal funds rate by 1 percentage point.
• B)when real GDP is equal to potential GDP and inflation is equal to its target of 4 percent, the federal funds rate should be kept at 2 percent.
• C)if inflation falls by 1 percentage point below its target of 2 percent, then the Fed should raise the real federal funds rate by one-half a percentage point.
• D)all of these are appropriate Fed actions.

---

Definitions:

Reversing Entries

Journal entries made at the beginning of an accounting period to reverse or cancel out adjusting entries made in the previous period.

Journal Entries

The record of financial transactions in the accounting books, capturing debits and credits for each transaction to maintain accurate financial statements.

Salaries Earned

Compensation that employees have earned during a specific period but have not yet been paid.

Workweek

A fixed, recurring period used to measure a worker's or business's hours worked, often consisting of five to seven consecutive days.