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      Question

      According to the Taylor principle, for

      inflation to be stable, the central bank must respond to an increase in inflation with ____ increase in the nominal interest rate.
      A no Correct Answer Incorrect Answer
      B an equal Correct Answer Incorrect Answer
      C a greater Correct Answer Incorrect Answer
      D a smaller Correct Answer Incorrect Answer

      Solution

      According to the Taylor principle, for inflation to be stable, the central bank must respond to an increase in inflation with a greater increase in the nominal interest rate.

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