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Question
The central bank of a country follows the Taylor rule to set its interest rate. If the equilibrium real interest rate rises by 1 percentage point, all other variables remaining unchanged,
a. the central bank should raise the nominal interest rate by 1 percentage point.
b. the central bank should lower the nominal interest rate by 1 percentage point.
c. the central bank should raise the nominal interest rate by 0.5 percentage points.
d. the central bank should lower the nominal interest rate by 0.5 percentage points.
a. the central bank should raise the nominal interest rate by 1 percentage point.
b. the central bank should lower the nominal interest rate by 1 percentage point.
c. the central bank should raise the nominal interest rate by 0.5 percentage points.
d. the central bank should lower the nominal interest rate by 0.5 percentage points.
Answer
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