If $\bar { m } = 0.5$ In the Simple Monetary Rule and the Inflation Rate Is

Multiple Choice

If $\bar { m } = 0.5$ in the simple monetary rule and the inflation rate is 2 percent below the target inflation rate, the Federal Reserve will:

A) lower the target rate by 2 percent
B) raise the interest rate by 1 percent
C) lower the interest rate by 1 percent
D) lower the marginal product of capital by 1 percent
E) Not enough information is given.