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. a. rises above; rises above b. rises above; drops below c. drops below; rises above d. drops below; drops below

A. rises above; rises above

Explanation:

The interest rate hike is a tight monetary policy that serves as an instrument for the Fed to manipulate the economic environment in times of inflation and economic overheating. This is because when interest rates rise, people stop consuming and investing to invest money in government bonds as the expectation of earning a good income. Thus less money circulates in the economy, lowering inflation (which is a monetary phenomenon) and slowing down economic activity. Economic activity needs to be contained only in situations such as the one in which real GDP is above the production target, which represents unsustainable production.

Plus: When inflation is low and the economy is stagnant, the Fed can lower interest rates to stimulate the economy. That is, the interest rate is a powerful tool the Fed has to keep the economic environment healthy.

as university of miami psychologists debra lieberman and adam smith pointed out in a recent article in the journal current directions in psychological science, humans have social and psychological mechanisms to deter incest. with very few exceptions, marriages between brothers and sisters and between parents and their children are verboten in every human culture. the primary psychological anti-incest mechanism is the yuck response. even the idea of sex with their mom or dad, bro or sis is upsetting to most people. the psychologist jonathan haidt has found that nearly everyone is repelled by the prospect of brother-sister sex, even in hypothetical situations in which there is no chance of pregnancy).

the biological cost of incest

this raises an interesting question: just what’s so bad about incest? sure, having sex with your dad or your sister seems gross — but why? some anthropologists have argued that incest taboos are learned social conventions. this explanation, however, doesn’t make sense to me as it does not explain the widespread existence of anti-incest mechanisms in creatures ranging from cockroaches to chimpanzees. second, the incest taboo is about as close to a universal law as human moral rules get.

why should mechanisms to avoid incest be so widespread both in nature and across human societies? the answer is simple. the problem with having sex close with relatives is that there is an astonishingly high chance that your offspring will be born with a serious birth defect.

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