In Taylor Rule equation,high value of parameter b indicates that
A)Fed cares more about avoiding recessions and high unemployment than about avoiding inflation.
B)Fed cares more about avoiding inflation than about avoiding recessions and high unemployment.
C)Fed cares more about avoiding recessions than about avoiding high unemployment.
D)Fed cares more about avoiding high unemployment than about avoiding recessions.

Question

Quizplus · Accepted Answer

The Taylor Rule equation is a monetary policy rule that sets the target for the short-term interest rate based on the level of inflation and the output gap. The parameter b in the Taylor Rule equation represents the weight that the central bank places on inflation relative to the output gap. A high value of b indicates that the central bank cares more about avoiding inflation than about avoiding recessions and high unemployment.

In Taylor Rule Equation,high Value of Parameter B Indicates That