The Notion That the Central Bank Should Set Its Federal

question 38

Multiple Choice

The notion that the central bank should set its federal funds target by a formula that puts weight on both output and inflation gaps is known as ________.

• A)the Taylor rule
• B)the constant growth rate rule for money
• C)the equation of exchange
• D)the Lucas rule

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Definitions:

APC

In economics, stands for Average Propensity to Consume, which is the ratio of total consumption to total disposable income.

APC

Average Propensity to Consume, which is the fraction of income that households spend on consumption as opposed to saving.

APS

Stands for Average Propensity to Save, which measures the proportion of income that households save rather than spend on goods and services.

Autonomous Consumption

The level of consumption that occurs when income is zero, representing the consuming behavior independent of current income.