The Taylor Rule Implies That the Fed Should Set the Federal

question 5

Multiple Choice

The Taylor rule implies that the Fed should set the federal funds target based on which of the following?

• A) an estimated long-run real interest rate
• B) the current deviation of the actual inflation rate from the Fed's inflation objective
• C) the proportionate gap between actual real GDP and a measure of potential real GDP
• D) all of the above

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Definitions:

Histogram

A graphical representation of data distribution, showing frequencies or occurrences of data within consecutive intervals.

Simulation

A method for modeling the operation of real-world processes or systems over time using computers or other technologies.

Random Samples

A method of selecting a subset of individuals from a statistical population in such a way that every individual has an equal chance of being chosen.

University

An institution of higher education and research, which awards academic degrees at various levels including bachelor, master, and doctorate.