You might be right Sponge and I did think about it on the test. But I just found it odd that the Taylor rule would suggest focusing on combating inflation while in fact you decrease rates which would lead to higher inflation and focus instead on the economy. I justified it to myself by thinking that those rates provided were extraneous information. Might be wrong, but if I am I think it is an odd question.
Think about it this way…if the target rate was 3.75 and the current rate was 5.5 it means they [central bank] were overly biased controlling inflation as predicted by the rule.
Seems like consensus is against me, still find this strange though. Don’t remember seeing any examples like this before.