A Central Bank That Follows the Taylor Rule

question 21

Multiple Choice

A central bank that follows the Taylor rule

• A)will not react to economic disturbances until its full effects are felt
• B)assumes there is no tradeoff between unemployment and inflation
• C)keeps the growth rate of money supply constant
• D)sets interest rates based on current economic conditions
• E)will start selling government bonds as soon as interest rates start to rise

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Definitions:

Inventories

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Domestic Net Worth

Domestic Net Worth calculates the total asset value of a nation's residents, companies, and government less all liabilities and debts within the country.

Trillion

A numerical value represented by 1 followed by 12 zeros, commonly used in discussions of national economies and government budgets.

Fixed-Income Security

A type of investment that pays regular income in the form of interest or dividends, such as bonds or preferred stock.