explain whether or not the Fed is guided by a Taylor Rule during the Coronavirus outbreak?

Expert Solution

YES. fed is guided by Taylor Rule . as rule says that Federal Reserve should increase rates when inflation is above target or GDP growth is too high and above potential. It also suggests vice-versa is also possible, but during the Coronavirus outbreak when world economy has been sluggish and dormant. people have been away with jobs and business, demand and supply have slashed down. in this scenarios both inflation and GDP have definitely downed. loss of life in US itself has raised the question of "surviving economy without people". but once we return to normal life Taylor rule guide the federal reserve because inflation and GDP that have come down to be raised again to a certain level. for the same Taylor rule will definitely help and fed will reduce the rates to give pace GDP and inflation to reach to certain level. it will help US economy to grow and survive, job and businesses will flourish again and people living in the economy will definitely gain and reached to a great level of success.

Rahul Sunny answered 2 years ago

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