Conducting Monetary Policy So That the FF Rate = $\pi$ + 05

question 44

Multiple Choice

Conducting monetary policy so that the FF rate = $\pi$ + 0.5( $\pi$ - 2) + 0.5 (GDP gap) , where the FF rate is the nominal federal funds interest rate, $\pi$ is the annual inflation rate, and GDP gap is the percentage shortfall of real GDP from its natural level, is an example of :

• A) an active policy rule.
• B) a passive policy rule.
• C) discretionary policy.
• D) an automatic stabilizer.

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Definitions:

Stanford-Binet Intelligence Scale

A standardized test that measures intelligence and cognitive abilities in children and adults, originating from the early 20th century.

Intelligence

The ability of individuals to understand complex ideas, adapt to environments, learn from experiences, and engage in various forms of reasoning.

Metamemory

Knowledge of the functions and processes involved in one’s storage and retrieval of information (memory), as shown by the use of cognitive strategies to retain information.

Immanent Justice

The view that a negative experience is a direct consequence of wrongdoing, reflecting the belief that morality is embedded within the structure of the universe.