According to the Taylor rule,for a given inflation rate,________.
A) if bank reserves double, the federal funds rate should double
B) if nominal output doubles, the federal funds rate should double
C) every percentage point increase in the inflation rate increases the federal funds rate by 1.5 percentage points
D) every percentage point increase in the nominal interest rate increases the federal funds rate by 1 percentage point

Question

Quizplus · Accepted Answer

The Taylor rule suggests that for every percentage point increase in inflation, the central bank should raise the federal funds rate by more than one percentage point to control inflation, typically by 1.5 percentage points.

According to the Taylor Rule,for a Given Inflation Rate,________