If the Federal Reserve tries to target inflation near 2%, the inflation rate is 3%, and output is 3% below potential GDP, then the target federal funds rate according to the Taylor rule is: Group of answer choices 3%. 4%. 5%. 6%.

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Q: The key "unconventional" monetary policy approaches of the Fed include which of the following?…

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Q: If the unemployment rate is falling from 4 to 3%, while the inflation rate is increasing from 2% to…

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Q: Suppose that the equilibrium real federal funds rate is 2.75% and the target inflation rate is…

A: Taylor rule: It refers to the rule that helps the Federal Reserve to decide whether they want to…

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Q: If the actual inflation rate is greater than the target inflation rate, then relative to the neutral…

A: Taylor Rule proposes how interest rates should be changed by the Federal Reserve to counter…

Q: If the Fed is following the "benchmark Taylor Rule", and the equilibrium real interest rate is 4%,…

A: Taylor rule: R = r* + π + 0.5 * (π - π*) + 0.5 * (Output gap) where, R = nominal federal funds rate…

Q: Using Taylor's rule, when the equilibrium real federal funds rate is 2 percent, the positive output…

A: please find the answer below.

Q: Suppose the actual federal funds rate is equal to the rate implied by a particular inflation goal.…

A: The central bank of the economy works towards maintaining price stability and maximum sustainable…

Q: the long-run federal funds target is also zero. If the inflation rate is 4 percent and the output…

A: Federal funds rate = long run target+ 1.5(inflation rate – inflation target) + 0.5(output gap)…

Q: Contractionary monetary policy is aimed at ________ the federal funds rate and ________the aggregate…

A: Adopting a contractionary monetary policy is aimed at decreasing the money in the hands of the…

Q: One thing all expansionary monetary policies have in common is that they all include increasing…

A: Expansionary monetary policy means using monetary policy tools in such a manner that it increases…

Q: Which one of the following statements best summarizes the Federal Reserve’s monetary policy over the…

A: The FR {"Federal Reserve"} is the entity in charge of the country's monetary policies and the…

Q: Suppose the inflation rate target is zero and the long-run federal funds target is also zero. If the…

A: (Q) Suppose the inflation rate target is zero and the long-run federal funds target is also zero. If…

Q: According to many studies, in industrialised countries there is strong evidence of a negative…

A: The central bank of a country is responsible for the introduction of monetary policy measures that…

Q: Suppose the actual inflation rate is 3 percent points, the Fed's inflation target is 4 percent…

A: Given the actual inflation = 3% Target inflation = 4% Unemployment is 1% below the target…

Q: Why is a flatter Philips curve good news for monetary policy authorities? Draw the Philips curve,…

A: The Philips Curve is a graph that depicts the relationship between inflation and unemployment.

Q: Is expansionary monetary policy responsible for the historically low real and nominal interest rates…

A: Yes, the expansionary monetary policy is responsible for low real and nominal interest rates of…

Q: Which of the following is not an essential element of inflation​targeting?     A. increased…

A: Monetary policy is the policy regarding money supply in the economy. The monetary policy is operated…

Q: Which of the below statements DOES NOT CORRECTLY describe the immense power or policy choice of the…

A: In the US, the federal reserve is considered as the central bank and works as the bank for the…

Q: The difference between the market monetarist 5-percent target for nominal GDP growth and the older,…

A: Monetarism is an economic and financial theory that implies that by regulating the rate of increase…

Q: In order to combat inflation, the Fed will ________ the federal funds rate thereby ________ the…

A: In order to combat inflation, the fed will increase the rate of federal funds. Which results in less…

Q: TRUE FALSE The more the Fed accommodates shocks to money demand, the larger the (government)…

A: If the Government spending multiplier is larger then there will be more Fed accommodates shocks to…

Q: If the money demand function is unstable and undergoes substantial, unpredictable changes, then the…

A: A money demand function describes the relationship between the income of the individuals, interest…

Q: The Taylor Rule helps a central bank set its federal funds rate based on divergence of actual (i)…

A: The Taylor rule gives a formula that in order to assist central bank in their decisions to alter…

Q: Monetary policy actions by the Fed are

A:

Q: Calculate what the federal funds rate should be using the Taylor Rule

A: The Taylor rule (also known as Taylor's rule or Taylor principle) is an econometric model that…

Q: Which of the following statements is most accurate about the Fed's use of the federal funds rate…

A: Macroeconomics is a subpart of economics that is used to understand the production, allocation and…

Q: If the central bank wants to achieve a long-run target inflation rate of p, at what rate should the…

A: A money demand function displays the influence that some aggregate economic variable will have on…

Q: Suppose that inflation is 2 percent, the federal funds rate is 4 percent, and real GDP falls 2…

A: Following information is provided:Nominal fed fund rate (N) = 4% or 0.04Inflation rate (I) = 2% or…

Q: How might each of the following factors complicate the implementation of monetary policy: long and…

A: Monetary policy is the policy that is taken by the central bank of the nation in order to control…

Q: The federal funds rate should never go above which of the following: the risk-free rate the interest…

A: Discount rate: It is the interest rate at which banks borrow from the Federal Reserve.  Federal fuds…

Q: Which of the following can be described accurately as “policy rates adjusted by the Fed?” (a)…

A: The policy rate adjusted by Fed refers to the adjustment in the interest rates by the Federal Open…

Q: Managing expectations of the Fed Funds rate in order to achieve lower long- term interest rates is…

A: Monetary Policy refers to the macroeconomic policies through which a country's central bank controls…

Q: To achieve contractionary monetary policy, the Fed could     decrease the discount rate increase…

A: Basic:- The tool of monetary policy is used by central bank of the country either in contractionary…

Q: The amount of inflation caused by expansionary monetary policy depends on the slope of the aggregate…

A: Aggregate supply curve is nothing but a graph that shows the relationship between real GDP and price…

Q: Which of the following policies did the Fed follow after 2014? To unwind expansionary policy…

A: Note:  We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: Consider the following simple monetary rules estimated for two different periods, 1969-1985 and…

A: Taylor Rule is defined as a formula which used to predict how the Central Bank would make changes in…

Q: QUESTION 3 Suppose the Fed's monetary policy follows the following Taylor rule: j= + 0.02 + B xy+Bx…

A: The federal reserve is the central bank of the United States and it works towards maintaining price…

Q: What incentives arise for a central bank to fall into thetime-inconsistency trap of pursuing overly…

A: Assume the banking sector attempts to spur demand by expanding the money supply while the market is…