Multiple Choice
If output falls 1.0 percentage point below its potential, the Taylor rule predicts that the Fed should:
A) reduce the federal funds rate by 0.5 percentage points.
B) reduce the federal funds rate by 1.0 percentage points.
C) raise the federal funds rate by 1.5 percentage points.
D) raise the federal funds rate by 1.0 percentage points.
Correct Answer:
Verified
Correct Answer:
Verified
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