According to the Taylor Rule, If the Central Bank Announced

question 28

Multiple Choice

According to the Taylor rule, if the central bank announced a zero percent inflation target but the current inflation rate is 2% and output is 2% below the full-employment level, at what level should the central bank set the nominal interest rate?

• A)1%
• B)2%
• C)3%
• D)4%
• E)5%

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Definitions:

Pronator Teres

A muscle in the forearm that helps in pronating the wrist by turning the palm downward.

Masseter

A facial muscle that plays a major role in the chewing of solid foods, connecting the jawbone to the cheekbone.

Digastric

A small muscle located under the jaw that plays a role in the opening of the mouth and the depression of the mandible.

Gastrocnemius

A large muscle located in the back part of the lower leg, forming part of the calf and responsible for flexing the foot and bending the knee.