According to the Taylor rule: for every 1 percentage point that unemployment exc

Question

According to the Taylor rule:

for every 1 percentage point that unemployment exceeds the natural rate of unemployment, there is a 2 percentage point gap between potential and actual GDP.

growth in the money supply should be limited to the long-run average growth rate of real GDP.

if inflation rises by 1 percentage point above its target, then the Fed should raise the real Federal funds rate by one-half a percentage point.

the rate of money growth should be set at 4 percent per year.

for every 1 percentage point that unemployment exceeds the natural rate of unemployment, there is a 2 percentage point gap between potential and actual GDP.

growth in the money supply should be limited to the long-run average growth rate of real GDP.

if inflation rises by 1 percentage point above its target, then the Fed should raise the real Federal funds rate by one-half a percentage point.

the rate of money growth should be set at 4 percent per year.

Explanation / Answer

if inflation rises by 1 percentage point above its target, then the Fed should raise the real Federal funds rate by one-half a percentage point.

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