The Taylor rule
A)advocates lowering interest rates in response to a higher output level
B)advocates a strict monetary growth rate
C)advocates stable interest rates
D)helps a central bank in setting its target interest rates based on current economic conditions
E)is of little help in the short-term stabilization of the economy

Question

Quizplus · Accepted Answer

The Taylor rule helps a central bank in setting its target interest rates based on current economic conditions. It takes into account factors such as inflation and output levels to determine the appropriate interest rate.

The Taylor Rule