According to John Taylor, during the period 2002-early 2006 the Fed set its federal funds rate target _____________ the rate that would have existed had the Fed set its target using the Taylor rule

Suppose the nominal interest rate is 5% and the rate of inflation is 5%. The real interest rate is therefore

A) 0%. B) 1%. C) 5%. D) 6%.

Contractionary fiscal policy to prevent real GDP from rising above potential real GDP would cause the inflation rate to be ________ and real GDP to be ________

A) lower; lower B) lower; higher C) higher; higher D) higher; lower