According to the Taylor rule, when real GDP is above its natural level, the nominal federal funds rate should be
, and when inflation is below 2 percent, the nominal Federal funds rate should be .
A)raised; raised
B)raised; lowered
C)lowered; raised
D)lowered; lowered

Question

Quizplus · Accepted Answer

The Taylor rule suggests raising the nominal federal funds rate when real GDP is above its natural level to prevent overheating, and lowering it when inflation is below 2 percent to stimulate economic activity.

According to the Taylor Rule, When Real GDP Is Above