Economist Lee Says Taylor Can Be One of Best Fed Chairs

The video discusses the Taylor Rule as a guiding tool for monetary policy, emphasizing the importance of knowing when to apply it. It critiques John Taylor's potential as a Fed Chair, suggesting he may not be the best choice. The concept of the neutral real rate is explained, highlighting its role in achieving economic equilibrium. The video concludes by discussing how the neutral rate affects interest rates, suggesting that even with 2% inflation, nominal rates may not rise significantly.

What is the primary function of the Taylor rule according to the video?

• To strictly follow a set formula for interest rates

• To replace the need for economic forecasts

• To ensure inflation is always at 2%

• To serve as a guiding tool for Federal Reserve chairs

Who is credited with inventing the Taylor rule?

• Tom Lee

• John Taylor

• David Stubbs

• Janet Yellen

What misconception about Janet Yellen and John Taylor is addressed in the video?

• That Yellen is a hawk and Taylor is a dove

• That Yellen is a dove and Taylor is a hawk

• That Yellen and Taylor have the same policy stance

• That neither Yellen nor Taylor follow the Taylor rule

What is the neutral real rate supposed to achieve in the economy?

• A balance between savings and investment

• A constant inflation rate of 2%

• A state of economic imbalance

• A fixed interest rate of 3%

Why can't the nominal rate rise significantly above 2% according to the video?

• Because the neutral real rate is close to zero

• Because inflation is always at 3%

• Because the Taylor rule prohibits it

• Because economic growth is too high