The Taylor rule allows for strict inflation targeting as long as
A. the output coefficient is zero
B. the inflation coefficient is zero
C. the output coefficient is negative
D. the inflation coefficient is negative
E. none of the above
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In the Taylor rule, if the output coefficient β is set to zero, then the central bank
A. is mostly concerned with maintaining full employment
B. always sets interest rates 2% above its inflation target
C. will aggressively lower interest rates as soon as output declines
D. engages in strict inflation targeting
E. none of the above
In the Taylor rule, if the output coefficient a is set to zero, then the central bank
A. is mostly concerned with maintaining a low inflation rate
B. will lower interest rates whenever it goes above 2 percent
C. will aggressively increase interest rates as soon as inflation rises
D. engages in real GDP targeting
E. none of the above
If a central bank engages in inflation targeting, then
A. it will not change interest rates in response to output fluctuations
B. it will change interest rates aggressively as soon as inflation or output changes
C. it will lower interest rates aggressively as soon as inflation heats up
D. it will increase interest rates aggressively as soon as aggregate supply increases
E. none of the above
The U.S. Fed can most effectively achieve an established federal funds rate target by
A. leaking information about its future intentions to financial markets
B. maintaining a stable monetary growth rate
C. undertaking open market operations to influence bank reserves
D. adjusting monetary growth to maintain a stable inflation rate
E. selling Treasury bills whenever short-term interest rates increase