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Basic Question 3 of 10
According to the Taylor rule, the neutral policy rate is the short-term real interest rate plus the inflation rate when ______
II. inflation is equal to the targeted level.
III. the output gap is close to zero.
IV. the unemployment rate is close to zero.
I. inflation is close to zero.
II. inflation is equal to the targeted level.
III. the output gap is close to zero.
IV. the unemployment rate is close to zero.
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Learning Outcome Statements
explain how the phase of the business cycle affects policy and short-term interest rates, the slope of the term structure of interest rates, and the relative performance of bonds of differing maturities;
describe the factors that affect yield spreads between non-inflation-adjusted and inflation-indexed bonds;
CFA® 2025 Level II Curriculum, Volume 6, Module 37.