According to the Taylor Rule, If the Target Rate of Inflation

Multiple Choice

According to the Taylor rule, if the target rate of inflation for the Fed is 2 percent and inflation rises to 3 percent at full unemployment, then the Fed should

A) raise the real federal funds rate by one percentage point.
B) lower the real federal funds rate by one percentage point.
C) raise their targeted interest rate by half of a percentage point.
D) lower their targeted interest rate by half of a percentage point.