Using the Taylor rule, if inflation is 1 percent, desired inflation is 2 percent, and output is 2 percentage points below potential, the Fed should target a federal funds rate of:
A. 1.5.
B. 6.5.
C. 4.5.
D. 2.5.
Answer: A
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One explanation for the change in the participation rate of married women in the U.S. labor force is that:
Economist Kenneth Arrow has shown mathematically that no system of voting will consistently represent the underlying preferences of voters. This finding is called
A) Arrow's median voter model. B) Arrow's Amendment to the public choice model. C) Arrow's majority vote paradox. D) the Arrow impossibility theorem.
When the domestic money prices of goods are held constant
A) a nominal dollar appreciation makes U.S. goods cheaper compared with foreign goods. B) a nominal dollar depreciation makes U.S. goods less appealing in foreign markets. C) a nominal dollar appreciation does not affect the prices of U.S. goods. D) a nominal dollar depreciation makes U.S. goods more expensive compared with foreign goods. E) a nominal dollar depreciation makes U.S. goods cheaper compared with foreign goods and a nominal dollar appreciation makes U.S. goods more expensive compared with foreign goods.
In a certain economy, when income is $1000 . consumer spending is $800 . The value of the multiplier for this economy is 2.5 . It follows that, when income is $1020, consumer spending is
a. $816 . For this economy, an initial increase of $100 in consumer spending translates into a $250 increase in aggregate demand. b. $816 . For this economy, an initial increase of $100 in consumer spending translates into a $400 increase in aggregate demand. c. $812 . For this economy, an initial increase of $100 in consumer spending translates into a $250 increase in aggregate demand. d. $812 . For this economy, an initial increase of $100 in consumer spending translates into an $800 increase in aggregate demand.