If the Federal Reserve Tries to Target Inflation near 2

question 104

Multiple Choice

If the Federal Reserve tries to target inflation near 2%, the inflation rate is 2.1%, and output is 4% below potential GDP, the target federal funds rate according to the Taylor rule is

• A) 0.05%.
• B) 2.1%.
• C) 2.15%.
• D) 4.15%.

---

Definitions:

Driven Gear

A gear that receives power from another gear or rotating component in a mechanical system.

Auxiliary Section

An additional section of a device or system that provides supplementary functions or capabilities.

Gear Ratios

The ratio between the numbers of teeth on two gears that are meshed or connected, affecting speed and torque in mechanical systems.

Countershafts

Countershafts are intermediary shafts used in machinery and vehicles to transmit power from the main shaft to another part of the system, often changing the direction and speed of movement.