Given the federal funds rate (FFR) , the equilibrium real interest rate (RIR) , inflation (INF) and the output gap (GAP) which equation defines the Taylor rule?
A) FFR = RIR + INF + 0.5(INF - RIR) + 0.5GAP
B) FFR = RIR + INF + (RIR - INF) + (RIR - GAP)
C) RIR = FFR + INF + (FFR - INF) + (FFR - GAP)
D) INF = RIR + FFR + (RIR - FFR) + (RIR - GAP)
Correct Answer:
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