Question

the taylor rule helps a central bank set its federal funds rate based on divergence of actual [1] from target [1] and actual [2] from potential [2]

Answer 1

Answer:

• The Taylor rule was proposed by the American economist John B. ... The Taylor rule prescribes economic activity regulation by choosing the federal funds rate based on the inflation gap between desired (targeted) inflation rate and actual inflation rate; and the output gap between the actual and natural level.