The Simple Monetary Policy Rule $R _ { t } - \bar { r } = \bar { m } \left( \pi _ { t } - \bar { \pi } \right)$

question 69

Multiple Choice

The simple monetary policy rule $R _ { t } - \bar { r } = \bar { m } \left( \pi _ { t } - \bar { \pi } \right)$ implies that:

• A) if \(\pi _ { t } < \bar { \pi } ,\) the Federal Reserve should lower the interest rate
• B) if \(\pi _ { t} > \bar { \pi } ,\) the Federal Reserve should lower the interest rate
• C) if \(\pi _ { t } = \bar { \pi } ,\) the Federal Reserve should raise the interest rate
• D) if \(\pi _ { t } = \bar { \pi } ,\) the interest rate is zero
• E) All of these answers are correct.

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Definitions:

Controversial Practice

Refers to a method or procedure that generates public disagreement or debate due to differing opinions on its ethics, effectiveness, or impact.

Trade Deficit

A nation's negative balance of trade, which exists when that country imports more products than it exports.

Taxes on Imports

Financial duties applied to goods brought into one country from another, typically used to protect domestic industries and generate revenue.