In the third quarter of 2020, U.S. GDP was $18,583 while full-employment GDP is an estimated $19,253. The long-run real interest rate, based on yields on 5-year TIPS, is 0.1%. The inflation rate, based on the PCE deflator, was 1.4%. Use this information to calculate what the federal funds rate should be according to the Taylor rule.

In the third quarter of 2020, U.S. GDP was $18,583 while full-employment GDP is an estimated $19,253. The long-run real interest rate, based on yields on 5-year TIPS, is 0.1%. The inflation rate, based on the PCE deflator, was 1.4%. Use this information to calculate what the federal funds rate should be according to the Taylor rule.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter15: Monetary Policy

Section15.4: Nonactivist Monetary Proposals

Problem 2ST

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