The Taylor rule is a recommendation of how

Question

Quizplus · Accepted Answer

The Taylor rule recommends that the Fed should set the federal funds rate target based on inflation and output gaps. It suggests that the Fed should raise interest rates when inflation is above its target or when the economy is overheating, and lower rates when inflation is below target or when the economy is sluggish. Therefore, the Taylor rule is a guideline for the Fed's monetary policy decisions, specifically in setting the federal funds rate target. The other choices are not related to the Taylor rule.

The Taylor Rule Is a Recommendation of How