According to the Taylor rule, the higher the inflation rate, other things equal, the
A) lower the federal funds target rate.
B) higher the federal funds target rate.
C) lower the discount rate.
D) higher the unemployment rate.

Question

Quizplus · Accepted Answer

According to the Taylor rule, the federal funds target rate should be increased by 1.5 times the inflation rate above the Federal Reserve's 2% target. Therefore, the higher the inflation rate, the higher the federal funds target rate should be.

According to the Taylor Rule, the Higher the Inflation Rate