According to the monetary policy rule, the central bank sets the nominal interest rate so the real interest rate increases when inflation its target, or output its natural level.
A)rises above; rises above
B)rises above; falls below
C)falls below; falls below
D)falls below; rises above

Question

Quizplus · Accepted Answer

The monetary policy rule suggests that the central bank raises the nominal interest rate to increase the real interest rate when inflation rises above its target or when output rises above its natural level, to stabilize the economy.

According to the Monetary Policy Rule, the Central Bank Sets