The Taylor rule for the operation of monetary policy is for the central bank
A) to target the growth rate of real GDP and raise or lower real interest rates as necessary to achieve the target.
B) to target the unemployment rate and raise or lower real interest rates as necessary to achieve the target.
C) to target the inflation rate and raise or lower real interest rates as necessary to achieve the target.
D) to target the exchange rate and raise or lower real interest rates as necessary to achieve the target.

Question

Quizplus · Accepted Answer

The Taylor rule suggests that central banks should adjust interest rates in response to deviations of actual inflation rates from target inflation rates and of actual GDP from potential GDP.

The Taylor Rule for the Operation of Monetary Policy Is