In discussing the Taylor rule, John Taylor wrote, I realize that there are differences of opinion about
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a. If Fed policy were guided by a Taylor rule with a coefficient of 1, rather than 0.5, on the output gap, would the federal funds rate be higher or lower during a recession? Briefly explain.
b. Why might economists and policymakers disagree over the best rule to guide monetary policy?
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a The federal funds rate would be lower during a recession The higher coefficient o...View the full answer
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