The Taylor rule expresses the federal funds rate as the weighted average of:
A) the unemployment rate and inflation.
B) inflation and short-run output.
C) the misery index, the money growth rate, and the mortgage rate.
D) the CPI and real GDP.
E) long-run output and the natural rate of unemployment.

Question

Quizplus · Accepted Answer

The Taylor rule expresses the federal funds rate as a weighted average of inflation and short-run output. Other variables like unemployment rate can be used, but the most common form of the Taylor rule uses the inflation rate and either the output gap or the deviation of output from potential.

The Taylor Rule Expresses the Federal Funds Rate as the Weighted