The proposed monetary rule that would specify how the Fed should respond to changes in GDP and inflation rates is called the:
A) Keynesian rule.
B) Friedman rule.
C) Taylor rule.
D) Lucas rule.

Question

Quizplus · Accepted Answer

The Taylor rule is a proposed monetary rule that specifies how the Fed should adjust interest rates in response to changes in inflation and GDP. It was developed by economist John Taylor and has been a popular framework for guiding monetary policy. The rule states that the Fed should raise interest rates in response to rising inflation and lower interest rates in response to economic slowdowns, as measured by changes in GDP.

The Proposed Monetary Rule That Would Specify How the Fed