The notion that the central bank should set its federal funds target by a formula that puts weight on both output and inflation gaps is known as ________.
A)the Taylor rule
B)the constant growth rate rule for money
C)the equation of exchange
D)the Lucas rule

Question

Quizplus · Accepted Answer

The notion of setting the federal funds rate target using a formula that considers both inflation and output gaps is known as the Taylor rule. It was introduced by John Taylor and is widely used by central banks worldwide to set monetary policy. The other options mentioned in the question (constant growth rate rule for money, equation of exchange, and Lucas rule) do not pertain to the specific concept mentioned in the question.

The Notion That the Central Bank Should Set Its Federal