According to the Taylor Principle,when the inflation rate rises,the nominal interest rate should be ________ by ________ than the inflation rate increase.
A)increased;more
B)increased;less
C)decreased;more
D)decreased;less

Question

Quizplus · Accepted Answer

According to the Taylor Principle, when the inflation rate rises, the central bank should increase the nominal interest rate by more than the increase in inflation to maintain real interest rates and avoid excessive inflation. This is known as a "hawkish" monetary policy stance. Therefore, the correct choice is A - increased by more than the inflation rate increase.

According to the Taylor Principle,when the Inflation Rate Rises,the Nominal