Assume That the Bank of Canada Has a Target Inflation

Multiple Choice

Assume that the Bank of Canada has a target inflation rate of 2% and that the values for how much the nominal target overnight rate responds to a deviation of inflation from its target,g,and how much the nominal target overnight rate responds to real GDP,h,are both 0.5.According to the Taylor rule,if inflation increases by 6%,the real interest rate will increase by

A) 3%.
B) 4%.
C) 6%.
D) 9%.