Given the Following Taylor Rule

question 2

Essay

 Given the following Taylor rule:
Target federal funds rate = natural rate of interest + current inflation + ½(inflation gap) +½(output gap)
Explain. Since the coefficients on the inflation and output gaps are equal, does this mean the central bank will respond to a one percent increase in inflation with the same change in the target rate as they would initiate from a one percent increase in the output gap

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Definitions:

Agitated

A state of nervousness or unrest, often characterized by rapid movement or erratic behavior.

Positive Symptoms

Symptoms present in disorders, such as schizophrenia, that include excesses or distortions, like hallucinations and delusions.

Negative Symptoms

Features often associated with psychotic disorders, such as reduced emotional expression, lack of motivation, or diminished social engagement.

Appropriate Behaviors

Actions or reactions that are deemed acceptable or suitable within a given context or society.