The Taylor rule is an example of
A) inflation targeting.
B) monetary targeting.
C) unemployment targeting.
D) a model to predict the Fed's target federal funds rate.

Question

Quizplus · Accepted Answer

The Taylor rule is a guideline for setting the federal funds rate based on the current state of the economy. It takes into account the inflation rate and the deviation of real GDP from its natural level to suggest how the Federal Reserve should adjust interest rates to stabilize the economy. It is not specifically about targeting inflation, monetary supply, or unemployment alone, but rather it provides a formulaic approach for setting interest rates to achieve overall economic stability.

The Taylor Rule Is an Example of