Which of the following arguments is not used to argue against the Fed attempting to keep interest and exchange rates stable?

	a.	Maintaining stable interest rates in the face of a fluctuating demand for money is not really within the capabilities of the Fed.
	b.	Keeping interest rates fixed for too long can actually lead to a financial crisis.
	c.	Stable exchange rates between nations that are very different may be problematic in the long run.
	d.	Stable exchange rates can rarely be expected to lead to higher levels of global trade.

Suppose the current real federal funds rate in the economy is 2.0%, the current inflation rate is 1.0%, the Federal Reserve's target inflation rate is 2.0%, and the output gap is -2.0%. According to the Taylor Rule, the Federal Reserve's target federal funds rate should be

	a.	4.0%.
	b.	4.5%.
	c.	5.0%.
	d.	5.5%.

The central bank of Elousia has an inflation target of 1.5%. In the current year, a shock has lowered the inflation rate to 1.0%. Following the shock, firms and households can expect an inflation rate of

	a.	1.0%.
	b.	1.5%.
	c.	2.0%.
	d.	2.5%.