Which equation best represents the Taylor rule? A)i = r* + ?^T + {w₁ × [(Y ? Y*)/Y*] × 100} + [w₂ × (? ? ?^T)] B)i = r* + ? + {w₁ × [(Y ? Y*)/Y*] × 100} + [w₂ × (? ? ?^T)] C)i = r + ?^T + {w₁ × [(Y ? Y*)/Y*] × 100} + [w₂ × (? ? ?^T)] D)i = r + ? + {w₁ × [(Y ? Y*)/Y*] × 100} + (w₂ × ?)

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The Taylor rule is an equation used to determine the target federal funds rate based on the current inflation rate and the deviation of real GDP from potential GDP. The equation is i = r* + π + {w1 × [(Y − Y*)/Y*] × 100} + [w2 × (π − πT)]. Among the given options, B is the closest match as it includes the inflation rate (π), the target inflation rate (πT), the natural rate of interest (r*), and the output gap (Y−Y*)/Y*.

Which Equation Best Represents the Taylor Rule