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According to the Taylor Rule, If Inflation Rises by 1

Question 46

Multiple Choice

According to the Taylor rule, if inflation rises by 1 percent above its target of 2 percent, the Fed should:


A) Lower the real Federal funds rate by 0.5 percent
B) Raise the real Federal funds rate by 0.5 percent
C) Lower the money supply by 5 percent
D) Raise the money supply by 5 percent

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