If in the Simple Monetary Rule and the Inflation

Multiple Choice

If 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.