The Taylor Rule Suggests to a Central Bank

question 25

Multiple Choice

The Taylor rule suggests to a central bank

• A)how to set interest rates in response to a change in economic activity
• B)that interest rates should be raised by 1.5% if inflation goes 1% above its announced target
• C)that interest rates should be raised by 0.5% if the GDP gap rises by 1%
• D)that real interest rates should be increased to cool off the economy whenever inflation rises
• E)all of the above

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Definitions:

Organizational Control

Refers to the processes and procedures that businesses use to regulate and guide their operations towards achieving set objectives and standards.

Motivated Expert

An individual who possesses a high level of expertise in a specific area and has a strong drive or motivation to apply this expertise towards achieving defined objectives.

Control Subsystem

Part of an organization's management system focused on monitoring and adjusting processes to meet objectives.

Organization's Culture

The shared values, beliefs, norms, and practices that shape the social and psychological environment of a business.