If the central bank follows the Taylor Rule nominal interest rate = .04 + α(output gap) + β (inflation rate - .03)
Where α = 0 and β = 1,then each of the following is true except
A) the real interest rate will remain approximately one percent
B) the central bank has a three percent inflation target
C) the policy rule excludes any consideration of employment and/or GDP
D) the nominal interest rate will be at least four percent
E) in the face of one percent deflation, the central bank would cut its nominal interest rate to zero

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The Answer of If the central bank follows the Taylor Rule nominal interest rate = .04 + α(output gap) + β (inflation rate - .03)
Where α = 0 and β = 1,then each of the following is true except
A) the real interest rate will remain approximately one percent
B) the central bank has a three percent inflation target
C) the policy rule excludes any consideration of employment and/or GDP
D) the nominal interest rate will be at least four percent
E) in the face of one percent deflation, the central bank would cut its nominal interest rate to zero

If the Central Bank Follows the Taylor Rule Nominal Interest