According to the Taylor Rule, the Fed Should Raise the Federal

question 53

Multiple Choice

According to the Taylor rule, the Fed should raise the federal funds rate by 0.5% relative to the inflation rate _____.

• A)if nominal GDP rises 1.0% above its target of 1.0%
• B)if real GDP rises 1.0% above its target of 1.0%
• C)if inflation falls 1.0% below its target of 2.0%
• D)if inflation rises 1.0% above its target of 2.0%
• E)if nominal GDP falls 1.0% below its target of 1.0%

---

Definitions:

Participation

The action of taking part in something or becoming involved in an activity or event.

Operative

An operative is a worker, especially skilled in manual, clerical, or administrative work, often employed within the operations of a business or organization.

Punishment

Discourages a behavior by making an unpleasant consequence contingent on its occurrence.

Reward

A reward is an incentive or benefit given in recognition of someone's effort, achievement, or contribution.