If the Current Rate of Inflation Is 1 Percent, Using $\bar { r } = 2 \% ; \bar { \pi } = 2 \% ; \bar { m } = 1 / 2 \%$

question 2

Multiple Choice

If the current rate of inflation is 1 percent, using the values suggested by Professor Taylor, $\bar { r } = 2 \% ; \bar { \pi } = 2 \% ; \bar { m } = 1 / 2 \%$ , the Taylor rule predicts a federal funds rate of:

• A) 0 percent
• B) 1.5 percent
• C) 1 percent
• D) 0.5 percent
• E) 3.5 percent

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Definitions:

403b Plans

Tax-deferred retirement savings plan available for public education organizations, some non-profit employers, and self-employed ministers.

Tax Penalty

An additional charge imposed by the tax authority on a taxpayer for not meeting tax obligations or for errors in a tax return.

Taxable Withdrawals

Withdrawals from an investment account that are subject to income tax, usually from accounts that offer tax advantages at the time of deposit or investment.

Roth Retirement Plan

A type of retirement savings account that allows for tax-free withdrawals in retirement, with contributions made with after-tax dollars.