John Taylor's Rule for Setting the Federal Funds Rate Proposes

question 99

Multiple Choice

John Taylor's rule for setting the federal funds rate proposes increasing the nominal federal funds rate as inflation _____ and the GDP gap _____.

• A) increases; increases
• B) increases; decreases
• C) decreases; increases
• D) decreases; decreases

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Definitions:

Market Value

The current price at which an asset or service can be bought or sold in an open and competitive marketplace.

Loss Carry-Back

Using a year’s capital losses to offset capital gains of previous years.

Capital Losses

Losses incurred when a capital asset is sold for less than its purchase price.

Capital Gains

The profit earned from the sale of an asset or investment that has increased in value.