Answer:
The answer is " both the output gap and the inflation are scales".
Explanation:
Taylor rule allows you to forecasts for optimal brief-term, lending rates whenever the actual inflation rate may not meet the projected inflation rate.
- The main objective of this rule is to give relatively close-term stabilization to the market while maintaining lengthy-term growth.
- This rule mainly works on the GDP, which provides the measurements of both the size of the economy and inflation, that must be quantified by establishing the governmental fund's rate limit.
