The simple monetary policy rule discussed at length in the text is:
A) $R _ { t } - \bar { r } = \bar { m } \left( u _ { t } - \bar { u } \right)$
B) $R _ { t } + \bar { r } = \bar { m } \left( \pi _ { t } - \bar { \pi } \right)$
C) $R _ { t } - \bar { r } = \bar { m } \left( \pi _ { z } - \bar { \pi } \right)$
D) $\bar { r } - R _ { t } = \bar { m } \left( \pi _ { t } - \bar { \pi } \right)$
E) $\bar { r } - R _ { t } = \bar { m } \tilde { Y } _ { t }$

Question

Quizplus · Accepted Answer

The simple monetary policy rule often discussed is the Taylor rule, which relates the nominal interest rate to the inflation rate and the output gap. Option C resembles the Taylor rule, where $R_t$ is the nominal interest rate, $\bar{r}$ is the real interest rate, $\bar{m}$ is a coefficient, $\pi_t$ is the inflation rate, and $\bar{\pi}$ is the target inflation rate.

The Simple Monetary Policy Rule Discussed at Length in the Text