The Taylor Rule States That the

question 32

Multiple Choice

The Taylor Rule states that the

• A) Fed should target the monetary base and not the federal funds rate.
• B) use of an exchange rate target, although costly, is economically efficient.
• C) Fed should adjust the federal funds rate to take account of the deviations of the inflation rate from its target and real GDP from potential GDP.
• D) None of the above is correct.

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