According to the Taylor Rule,the Two Most Important Factors Influencing

question 200

Multiple Choice

According to the Taylor rule,the two most important factors influencing the Federal Reserve's changing the federal funds rate are:

• A) an inflation rate different from the Fed's target and output different from potential GDP.
• B) an inflation rate different from the Fed's target and increasing interest rates.
• C) increasing interest rates and output different from potential GDP.
• D) output different from potential GDP and unemployment rates different from full employment.

---

Definitions:

Arithmetic Average Return

The simple mean of a set of returns, calculated by summing the returns over a period and dividing by the number of periods.

Nominal Return

The amount of money gained or lost on an investment, without adjusting for inflation, as opposed to the real return which is adjusted for inflation.

Real Rate

The interest rate adjusted for inflation, representing the true cost of borrowing or the true return on investment.

Variance

A statistical measurement of the dispersion of a set of values, indicating how much the numbers in the set deviate from the mean or average of the set.