Using the Taylor Rule,if the Current Inflation Rate Equals the Target

question 76

Multiple Choice

Using the Taylor rule,if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP,then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal funds rate.

• A)will be greater than
• B)will be less than
• C)will be the same as
• D)may be greater than or less than

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Definitions:

Perpendicular

Describes two lines, planes, or surfaces meeting at a right angle (90 degrees).

Horizontal Line

A straight line with no slope, moving left to right parallel to the x-axis in Cartesian coordinates.

Slope-intercept Form

A way of writing linear equations using the formula \(y = mx + b\), where \(m\) is the slope of the line and \(b\) is the y-intercept.

Slope

The calculation of how steep or inclined a line is, determined by the ratio of its vertical shift to its horizontal shift between any two points on the line.