Question 1
A Taylor rule balances two objectives. These are
◦ real GDP and unemployment.
◦ real GDP and inflation.
◦ inflation and the price level.
◦ exchange rates and the balance of payments.
Question 2
If the Bank of England were to adopt a Taylor rule, GDP would be likely to fluctuate ________ and inflation would be likely to fluctuate ________ than at present.
◦ more; more
◦ more; less
◦ less; less
◦ less; more