The Taylor Principle says that when the overnight inflation rate increases by more than the increase in the inflation rate, then the real interest rate would decline, stimulating economic activity and leading to more inflation.

Question

Quizplus · Accepted Answer

The Taylor Principle suggests that central banks should raise nominal interest rates by more than the increase in inflation to prevent real interest rates from falling and thus discourage further inflation.

The Taylor Principle Says That When the Overnight Inflation Rate