According to the Taylor rule if the target rate of inflation for the Fed is 2 percent and real GDP rises by 1 percent above pote

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According to the Taylor rule if the target rate of inflation for the Fed is 2 percent and real GDP rises by 1 percent above pote

ntial GDP, then the Fed should_______________.a. raise the real federal funds by one percentage pointb. lower the real federal funds rate by one percentage pointc. raise the real federal funds rate by half of a percentage pointd. lower the real rederal funds rate by half of a percentage point

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1 answer:

velikii [3] · Answer 1 · 2022-03-17T09:56:46+03:00

Answer:

C. raise the real federal funds rate by half of a percentage point

Explanation:

As per the Taylor rule, If inflation rate and target inflation rates are same and real GDP exceeds potential GDP by 1%, then real federal fund rates should increase by .5%. It is as per the Taylor rule formula.