Suppose the Bank of Canada Uses the Taylor Rule to Set

question 34

Multiple Choice

Suppose the Bank of Canada uses the Taylor rule to set the overnight loans rate. If the inflation rate is 3 percent, and the output gap is 0 percent, then the Taylor rule sets the overnight rate equal to

• A)5 percent.
• B)5.5 percent.
• C)0 percent.
• D)2.5 percent.
• E)6 percent.

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