2) What is the Taylor rule, and with Turkey’s economy at full employment, is the increase in Turkey’s interest rate consistent with it?
The Taylor rule is a rule that sets the policy interest rate to __________ the inflation rate and Turkey’s interest rate __________ consistent with the Taylor rule.
Wrong! - What is the Taylor rule? If Turkey’s central bank uses the Taylor rule, what does the policy interest rate equal?
That's Right! - The Taylor rule sets the policy interest rate at 2 percent a year plus the inflation rate plus one half of the deviation of inflation from 2 percent a year, plus one half of the output gap. If the actions of Turkey’s central bank were consistent with the Taylor rule, then it would need to set the interest rate much higher than 15%.
