According to the Taylor Rule, If Real GDP Rises by 1

question 65

Multiple Choice

According to the Taylor rule, if real GDP rises by 1 percent above potential GDP, the Fed should raise:

• A) The supply of money by 10 percent
• B) The velocity of money by 10 percent
• C) The natural rate of unemployment from 4 percent to 5 percent
• D) The Federal funds rate, relative to the current inflation rate, by 0.5 percent

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