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In the New Keynesian Rational Expectations Model with a Taylor

Question 20

Multiple Choice

In the New Keynesian Rational Expectations model with a Taylor rule, if the central bank follows the Taylor principle, in the steady state in which nominal interest rate is zero


A) inflation is higher than the central bank's target.
B) inflation is greater than zero.
C) inflation is lower than the central bank's target.
D) inflation is zero.
E) the central bank hits its inflation target.

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