According to the Taylor Rule, the Fed Should Raise the Federal

Multiple Choice

According to the Taylor rule, the Fed should raise the federal funds rate by 0.5% relative to the inflation rate _____.

A) if nominal GDP rises 1.0% above its target of 1.0%
B) if real GDP rises 1.0% above its target of 1.0%
C) if inflation falls 1.0% below its target of 2.0%
D) if inflation rises 1.0% above its target of 2.0%
E) if nominal GDP falls 1.0% below its target of 1.0%