According to the Taylor rule, the Fed should:
A)lower the fed funds rate by 2.0% if inflation rises 1.0% above its target of 1.0%.
B)raise the fed funds rate by 2.0% if inflation rises 1.0% above its target of 1.0%.
C)lower the fed funds rate by 0.5% if inflation rises 1.0% above its target of 2.0%.
D)raise the fed funds rate by 0.5% if inflation rises 1.0% above its target of 2.0%.

Question

According to the Taylor rule, the Fed should:
A)​lower the fed funds rate by 2.0% if inflation rises 1.0% above its target of 1.0%.
B)​raise the fed funds rate by 2.0% if inflation rises 1.0% above its target of 1.0%.
C)​lower the fed funds rate by 0.5% if inflation rises 1.0% above its target of 2.0%.
D)​raise the fed funds rate by 0.5% if inflation rises 1.0% above its target of 2.0%.

Quizplus · Accepted Answer

The Answer of According to the Taylor rule, the Fed should:
A)​lower the fed funds rate by 2.0% if inflation rises 1.0% above its target of 1.0%.
B)​raise the fed funds rate by 2.0% if inflation rises 1.0% above its target of 1.0%.
C)​lower the fed funds rate by 0.5% if inflation rises 1.0% above its target of 2.0%.
D)​raise the fed funds rate by 0.5% if inflation rises 1.0% above its target of 2.0%.

According to the Taylor Rule, the Fed Should