In the New Keynesian Rational Expectations Model with a Taylor

question 9

Multiple Choice

In the New Keynesian Rational Expectations model with a Taylor rule, if the central bank follows the Taylor principle, in the steady state in which nominal interest rate is zero,

• A) the central bank hits its inflation target.
• B) inflation is lower than the central bank's target.
• C) inflation is higher than the central bank's target.
• D) inflation is greater than zero.
• E) inflation is zero.

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