According to the Taylor Principle, for inflation to be stable, the central bank must respond to an increase in inflation with
Increase in the nominal interest rate.
A)no
B)an equal
C)a greater
D)a smaller

Question

Quizplus · Accepted Answer

The Taylor Principle suggests that for inflation to remain stable, the central bank must adjust the nominal interest rate by a greater amount than the increase in inflation. This means that the choice C is correct, as the central bank would need to respond to an increase in inflation with a greater increase in the nominal interest rate.

According to the Taylor Principle, for Inflation to Be Stable