The Taylor Rule Uses Three Variables to Determine the Target

question 104

Multiple Choice

The Taylor rule uses three variables to determine the target for the federal funds rate. Which of the following is NOT one of those variables?

• A) monetary base
• B) equilibrium real interest rate
• C) inflation rate
• D) output gap

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Definitions:

Cash

Cash involves money in the form of currency, which includes bank notes and coins, that is in hand or readily available in deposit accounts for immediate use.

Building

A structure established or built from materials to provide shelter or accommodate individuals, businesses, or activities.

Consolidation

The process of combining financial statements of parent and subsidiary companies into one comprehensive set of statements.

Fair Value

The estimated market value of an asset or liability, based on current conditions and informed market participant transactions.