Which statement describes the difference between the Taylor rule and inflation targeting?
A) The Federal Reserve uses inflation targeting, and the Bank of England uses the Taylor rule.
B) The Taylor rule responds to past inflation, and inflation targeting is based on a forecast of inflation.
C) Inflation targeting responds to past inflation, and the Taylor rule is based on a forecast of inflation.
D) Inflation targeting is used in conducting fiscal policy, while the Taylor rule is used in monetary policy.

Question

Quizplus · Accepted Answer

The Taylor rule uses past inflation and output gap data to determine the appropriate interest rate, while inflation targeting is based on a forecast of inflation.

Which Statement Describes the Difference Between the Taylor Rule and Inflation