If a central bank is using the Taylor Rule and decides to lower its inflation target, this will lead to ____ interest rate targets.
A) higher
B) lower
C) unchanged
D) cannot be determined

Question

Quizplus · Accepted Answer

The Taylor Rule suggests that if a central bank lowers its inflation target, it will aim for a higher interest rate to cool down the economy and reduce inflationary pressures.

If a Central Bank Is Using the Taylor Rule and Decides