Results obtained from the Taylor model suggest that the effects of changes in the nominal money supply are neutral after:
A) 2 years.
B) 4 years.
C) 10 years.
D) 6 years.
E) 8 years.

Question

Quizplus · Accepted Answer

According to the Taylor model, the effects of changes in the nominal money supply are neutral after four years. This is due to the fact that changes in the money supply only affect output and inflation levels with a lag, and this lag is estimated to be around 2-3 years for output and 3-4 years for inflation. Therefore, the full effects of changes in the money supply are not felt until about four years after the initial change.

Results Obtained from the Taylor Model Suggest That the Effects