$8.$ Using the Taylor rule

The Taylor rule$$specifies how policymakers should set the federal funds rate target.

Suppose that U$.$S$.$ real GDP falls $2\%$ below potential GDP$,$ all else constant. According to the Taylor rule, the Fed should$$the federal funds rate target by$.$

Suppose instead that the U$.$S$.$ inflation rate falls by $2\%,$ all else constant. According to the Taylor rule, the Fed should$$the federal funds rate target by$.$

True

False

Which of the following is not$$a point of contention between activist and nonactivist policy advocates with regard to monetary policy?

The effectiveness of monetary policy due to lags

The time it takes for the economy to adjust to Natural Real GDP

The effect of monetary policy on aggregate demand

The flexibility of monetary policy depending on the state of the economy