The Taylor Rule Suggests to a Central Bank

Multiple Choice

The Taylor rule suggests to a central bank

A) how to set interest rates in response to a change in economic activity
B) that interest rates should be raised by 1.5% if inflation goes 1% above its announced target
C) that interest rates should be raised by 0.5% if the GDP gap rises by 1%
D) that real interest rates should be increased to cool off the economy whenever inflation rises
E) all of the above