In Taylor Rule equation,high value of parameter a indicates that
A)Fed cares more about avoiding recessions and high unemployment than about avoiding inflation.
B)Fed cares more about avoiding inflation than about avoiding recessions and high unemployment.
C)Fed cares more about avoiding recessions than about avoiding high unemployment.
D)Fed cares more about avoiding high unemployment than about avoiding recessions.

Question

Quizplus · Accepted Answer

In the Taylor Rule equation, a high value of the parameter $a$ (often related to the inflation gap) indicates that the Federal Reserve (Fed) places a higher priority on stabilizing inflation. This means the Fed is more concerned with avoiding inflation than with avoiding recessions and high unemployment.

In Taylor Rule Equation,high Value of Parameter a Indicates That