If the Fed follows the Taylor rule and the economy goes into a recession, the Fed would
A) lower the federal funds rate.
B) reduce tax rates.
C) raise the federal funds rate
D) increase government expenditures.
E) None of the above answers are correct.

Question

Quizplus · Accepted Answer

The Taylor rule suggests that the Federal Reserve should lower the federal funds rate in response to a recession to stimulate economic activity by making borrowing cheaper.

If the Fed Follows the Taylor Rule and the Economy