Monetary policy reaction function

== The Monetary Policy Reaction Function ==

The Monetary Policy Reaction Function (MPRF) is the upward-sloping relationship between the inflation rate and the unemployment rate. When the inflation rate rises, a central bank wishing to fight inflation will rise interst rates to reduce ioutput and thus inrease the unemployment rate. The MPRF is a function of [the Taylor Rule], the Investment-Spending Curve ([IS Curve]) and [Okun's Law]

The MPRF has the equation:

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