According to the Taylor rule, the Fed should raise the federal funds interest rate when inflation ________ the Fed's inflation target or when real GDP ________ the Fed's output target.
According to the Taylor rule, the Fed should raise the federal funds interest rate when inflation rises above the Fed's inflation target or when real GDP rises above the Fed's output target.
The Federal Reserve seeks to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.
