Given the Following Taylor Rule

question 23

Essay

 Given the following Taylor rule:
Target federal funds rate = natural rate of interest + current inflation + 2x(inflation gap) + x(output gap);?What do the coefficients on the inflation and output gaps (2x, x) reveal? 

---

Definitions:

Dilated Pupils

A condition where the pupils of the eyes become larger than normal, which can occur due to various factors including low light conditions, certain emotions, or the influence of drugs.

Substance Abuse

The harmful use of substances, including drugs and alcohol, leading to addiction and other detrimental health and social consequences.

Suspicious

Characterized by or indicative of suspect or lack of trust.

PCP

A dissociative drug, also known as phencyclidine, that can induce hallucinations, distortions in perceptions, and is used illicitly.