The notion that the central bank should set its federal funds target by a formula that puts weight on both output and inflation gaps is known as ________.
A) the Taylor rule
B) the constant growth rate rule for money
C) the equation of exchange
D) the Lucas rule
Question 2
Hector's wealth is zero, he expects to work for another 45 years at a constant salary of 80,000 and live for another 60 years. Assuming taxes are zero, if Hector completely smooths consumption over his lifetime, his annual consumption is
A) 60,000.
B) 62,222.
C) 80,000.
D) 106,667.
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