If m = 1/2 in the simple monetary rule and if inflation rises by 2 percent, interest rates should rise by 2 percent.

Name: If m = 1/2 in the simple monetary rule and if inflation rises by 2 percent, interest rates should rise by 2 percent.
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In a simple monetary rule like the Taylor rule, the interest rate response is typically less than one-for-one with inflation. If m = 1/2, a 2 percent rise in inflation would lead to a 1 percent increase in interest rates, not 2 percent.

If M = 1/2 in the Simple Monetary Rule and If