According to the Taylor rule,the two most important factors influencing the Federal Reserve's changing the federal funds rate are:
A) an inflation rate different from the Fed's target and output different from potential GDP.
B) an inflation rate different from the Fed's target and increasing interest rates.
C) increasing interest rates and output different from potential GDP.
D) output different from potential GDP and unemployment rates different from full employment.

Question

Quizplus · Accepted Answer

The Taylor rule is a guideline for central banks to set interest rates based on economic conditions such as inflation and output levels relative to potential GDP. The two most important factors in the rule are an inflation rate that differs from the central bank's target and output level that is different from the potential GDP. This means that if inflation is too high or too low, or if the economy is operating above or below its potential, the central bank may adjust the federal funds rate to address these issues. The other options do not align with the factors considered in the Taylor rule.

According to the Taylor Rule,the Two Most Important Factors Influencing