If Each of the Coefficients in Front of the Inflation

question 54

Multiple Choice

If each of the coefficients in front of the inflation gap and the output gap in the formula for the Taylor rule is 0.5, this implies:

• A)That the Fed assumes that inflation and output are right on target
• B)That inflation and output are one half a percent off of their targets
• C)The Fed is giving equal weight to objectives of inflation and output
• D)That the Fed will not accept higher inflation unless unemployment falls by twice the inflation rate

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