If the Central Bank Did Not Follow the Taylor Principle

question 51

Multiple Choice

If the central bank did not follow the Taylor principle so that the real interest rate fell when inflation rose, ________.

• A) inflation would increase
• B) the nominal interest rate would not change
• C) expected inflation would be equal to zero
• D) output would remain unchanged

---

Definitions:

Vacancy

An unoccupied position or job opening within an organization.

Labor Shortages

A situation where the demand for labor in a particular market or industry exceeds the supply of workers willing or available to work.

Reducing Work Hours

Refers to the practice of decreasing the amount of time employees are required to work, often aimed at improving work-life balance and potentially boosting productivity.

Early Retirement

The process of ending one's professional career and withdrawing from the workforce before reaching the traditional age of retirement, often incentivized by employers.