According to the Taylor rule, if inflation equals 3 percent and there is a recessionary gap equal to 3 percent of potential output, the Fed will set a real interest rate of ________ percent and a nominal interest rate of ________ percent.

Explain the reasons firms might follow the Baumol model of maximizing revenue subject to achieving a minimum level of profits

What will be an ideal response?

Imposing a tax on an activity that generates an external benefit will cause participants in the activity to increase the amount of the activity undertaken

a. True b. False