Recall the Application about the possibility that the Federal Reserve's loose monetary policy was responsible for the housing boom during the 2000s to answer the following question(s).
-Recall the Application. When applying the Taylor Rule to the decade of 2000, economist John Taylor found that past experience showed that from 2001 to 2004, the Fed should have ________ interest rates instead of ________ interest rates.
A) lowered; raising
B) raised; lowering
C) not changed; lowering
D) raised; not changing

Question

Quizplus · Accepted Answer

According to the Taylor Rule, interest rates should have been higher from 2001-2004 than they actually were. This suggests that the Federal Reserve was keeping interest rates too low, which could have contributed to the housing boom during the 2000s. Therefore, the Fed should have raised interest rates instead of lowering them during this time period to help prevent the housing bubble.

Recall the Application About the Possibility That the Federal Reserve's