1) If the Fed forces interest rates down. To accomplish this what is likely to have happened to M1 and M2?

A: M1 went down and M2 went up

B: Both M1 and M2 go down

C: M1 went up and M2 have gone down

D: Both M1 and M2 went up

E: None of the above

2) If the actual inflation is low and the inflation gap and GDP gap are both negative:;

A: The economy is in a recession and the Taylor Rule would suggest high FFR

B: The economy is in inflation and taylor rule would tell the fed to raise federal funds rate

C: the economy is at full employment and taylor rule would hold the FFR constant:

D: the taylor rule could suggest that the Fed funds rate should be negative