Assuming the Simple Taylor Rule for Dictating the Federal Funds

question 18

Multiple Choice

Assuming the simple Taylor rule for dictating the federal funds rate, when the actual federal funds rate deviates from the suggested rate, it can be explained by:

• A) bad monetary policy
• B) discretionary fiscal policy
• C) a richer version of the Taylor Rule
• D) poorly informed monetary policy
• E) poorly informed fiscal policy

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Definitions:

Boots

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Cost Curve

A graphical representation showing how the cost of producing a good varies with the level of output.

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