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Conducting Monetary Policy So That the FF Rate = π\pi + 05

Question 44

Multiple Choice

Conducting monetary policy so that the FF rate = π\pi + 0.5( π\pi - 2) + 0.5 (GDP gap) , where the FF rate is the nominal federal funds interest rate, π\pi is the annual inflation rate, and GDP gap is the percentage shortfall of real GDP from its natural level, is an example of :


A) an active policy rule.
B) a passive policy rule.
C) discretionary policy.
D) an automatic stabilizer.

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