The Taylor rule uses three variables to determine the target for the federal funds rate. Which of the following is NOT one of those variables?
A) monetary base
B) equilibrium real interest rate
C) inflation rate
D) output gap

Question

Quizplus · Accepted Answer

The Taylor rule does not use the monetary base as one of its variables. It uses the equilibrium real interest rate, the inflation rate, and the output gap to determine the appropriate federal funds rate.

The Taylor Rule Uses Three Variables to Determine the Target