The Taylor Rule Is 2 + Inflation Rate + 1/2

question 203

Multiple Choice

The Taylor rule is 2 + inflation rate + 1/2 output gap + 1/2 inflation gap. If inflation is 3%, output gap is 1%, and the inflation gap is 1%, the target interest rate is:

• A) 4%
• B) 5%
• C) 6%
• D) 7%

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Definitions:

Consonant-Vowel Combinations

Pairs or groups of consonant and vowel sounds that form the basic units of syllables in spoken language.

Denial

A defense mechanism in which confrontation with a reality or fact is avoided by denying the existence of the problem or reality.

Bargaining

A process of negotiation between two or more parties each with its own aims, needs, and viewpoints seeking to discover a common ground and reach an agreement to settle a matter of mutual concern or resolve a conflict.

Acceptance

The process or act of receiving or consenting to something or someone, often implying a positive emotional response.