Use the Following to Answer Questions

question 263

Multiple Choice

Use the following to answer questions :
Scenario: Taylor Rule
Suppose the Federal Reserve is following the Taylor rule, which takes both inflation and business cycles into account when setting the federal funds rate. Also suppose that the inflation rate in the economy is 3% and the unemployment gap is -2%.
-(Scenario: Taylor Rule) Look at the scenario Taylor Rule. In this case, the Federal Reserve will set the federal funds rate at:

• A)9.8%.
• B)6.25%.
• C)5.75%.
• D)4.75%.

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