When we raise the federal funds rate by 2 percent for every 1 percent increase in the inflation rate, this is an example of:

Question

Quizplus · Accepted Answer

This is an example of a monetary policy rule, as it involves the Federal Reserve adjusting the federal funds rate in response to changes in inflation. Fiscal policy refers to government spending and taxation, and discretionary policy involves policymakers making individual decisions rather than following predetermined rules.

When We Raise the Federal Funds Rate by 2 Percent