Which of the following is NOT a basis for the Taylor-rule guideline for how the Federal Reserve should set its target value for the federal funds rate?
A. the gap between actual real GDP and a measure of potential real GDP
B. an estimated long-run real interest rate
C. the current deviation of the actual inflation rate from the Fed's inflation objective
D. the present deviation of the actual unemployment rate from the Fed's unemployment objective
Answer: D
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What will be an ideal response?
A negative demand shock decreases the price level in the short run
a. True b. False
After a hurricane in Florida knocked out the regional water supply for several days, the demand for bottled water increased sharply. In a market economy, how will this increase in demand affect the equilibrium price and quantity of bottled water?
a. Price will increase, and quantity will decrease. b. Price will decrease, and quantity will decrease. c. Price will decrease, and quantity will increase. d. Price will increase, and quantity will increase.
The poverty line:
a. equals three times an economy food budget. b. All of the answers are correct. c. equals the median income level. d. separates those on welfare from those not on welfare.