A Central Bank That Does NOT Follow the Taylor Principle

question 85

Multiple Choice

A central bank that does NOT follow the Taylor principle will fail to raise nominal interest rates by more than the increase in expected inflation. As a result,the monetary policy curve is ________ sloping and the aggregate demand curve is ________ sloping.

• A)upward;downward
• B)downward;downward
• C)upward;upward
• D)downward;upward

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Definitions:

Pessimistic Explanatory

A cognitive style where individuals habitually attribute negative events to stable, global, and internal causes.

Internal

Pertaining to or occurring within an individual’s mind or self.

Internal Causes

denotes reasons or factors within an individual, such as personal beliefs or emotions, that can influence their behavior or attitude.

Fritz Heider

An Austrian psychologist known for his contributions to attribution theory in social psychology.