Refer to the above figure. A movement from B to D would be a result of
A) an increase in the quantity of money in circulation.
B) an increase in the marginal income tax rate.
C) an increase in labor productivity.
D) an increase in government expenditures.
Question 2
According to the Taylor Rule, for a given inflation rate, ________.
A) every percentage point increase in the inflation rate increases the federal funds rate by 1.5 percentage points
B) if bank reserves double, the federal funds rate should double
C) every percentage point increase in the nominal interest rate increases the federal funds rate by 1 percentage point
D) if nominal output doubles, the federal funds rate should double
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