What is the Taylor rule and how does it work?
What will be an ideal response?
The Taylor rule is an instrument rule. The Taylor rule is a proposed formula for setting the federal funds rate. Taylor proposes that if his formula is followed inflation will stay close to 2 percent a year and real GDP will remain closer to potential GDP, thereby improving macroeconomic performance. The formula is based on the core inflation rate and the output ga
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The term ceteris paribus means that
a. all important variables in the real world are considered b. all factors that influence the event are changing at the same time c. everything else is being held constant d. everything, except one influence, is changing e. the consumer is king
Describe the circumstances under which the M1 money supply could fall while the M2 money supply remains constant at the same time