If the Central Bank Did Not Follow the Taylor Principle

question 110

Multiple Choice

If the central bank did not follow the Taylor principle ________.

• A) inflation would spiral out of control
• B) it could rely on autonomous monetary policy changes
• C) it could rely on non-conventional monetary policy tools
• D) both B and C

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Definitions:

Amortization Period

The length of time it takes to pay off a loan or mortgage in full with regular payments that cover both principal and interest.

Compounded Monthly

A method of calculating interest where the interest earned each month is added to the principal, so the balance doesn't merely grow; it grows at an increasing rate.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Loan

Money that is borrowed, typically from a bank or financial institution, that is expected to be paid back with interest.