According to the Taylor Rule, If the Target Rate of Inflation

question 73

Multiple Choice

According to the Taylor rule, if the target rate of inflation for the Fed is two percent and real GDP rises by one percent above potential GDP, then the Fed should:

• A) Raise the real federal funds rate by one percentage point
• B) Lower the real federal funds rate by one percentage point
• C) Raise the real federal funds rate by half of a percentage point
• D) Lower the real federal funds rate by half of a percentage point

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Definitions:

Learned Taste Aversion

Acquired association between a specific taste or odor and illness; leads to an aversion to foods that have the taste or odor.

Innate Releasing Mechanism

A preprogrammed response observed in animals that is triggered by specific external stimuli.

Hypothalamus

The hypothalamus is a crucial brain region involved in regulating various bodily functions, including temperature, hunger, thirst, emotions, and circadian rhythms.

Amygdala

An almond-shaped set of neurons located deep in the brain's medial temporal lobe, involved in memory, decision-making, and emotional responses.