The rule that is used to set a target for the federal funds rate in response to deviations of real output and inflation from their targets is
A)the Taylor rule.
B)a nonactivist rule.
C)a money-growth rule.
D)Mc Cullum's rule.

Question

Quizplus · Accepted Answer

The Taylor rule is a popular monetary policy rule that suggests the federal funds rate should be adjusted in response to deviations of real output and inflation from their respective targets. It specifies that the federal funds rate should be set as a function of the inflation rate and the output gap. The Taylor rule is named after economist John B. Taylor, who developed it in the early 1990s.

The Rule That Is Used to Set a Target for the Federal