QUESTION 3Suppose the Fed's monetary policy follows the following Taylor rule: /= + 0.02 + B×y+Bx(n-0.02)where is inflation, y is the percentage deviation of output from its full-employment level and 8=0.71. According to the Taylor rule, if output is 2% above its full-employmentlevel and inflation is 4%, the Fed should set the Fed funds rate to_%. (Submit your answer with up to two decimals and in percent terms, i.e., 10.22 for 10.22% and 11.44 for11.442%.)

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

QUESTION 3 Suppose the Fed's monetary policy follows the following Taylor rule: j= + 0.02 + B xy+Bx (n-0.02) where T is inflation, y is the percentage deviation of output from its full-employment level and B-0.71. According to the Taylor rule, if output is 2% above its full-employment level and inflation is 4%, the Fed should set the Fed funds rate to_%. (Submit your answer with up to two decimals and in percent terms, i.e., 10.22 for 10.22% and 11.44 for 11.442%.)

QUESTION 3 Suppose the Fed's monetary policy follows the following Taylor rule: j= + 0.02 + B xy+Bx (n-0.02) where T is inflation, y is the percentage deviation of output from its full-employment level and B-0.71. According to the Taylor rule, if output is 2% above its full-employment level and inflation is 4%, the Fed should set the Fed funds rate to_%. (Submit your answer with up to two decimals and in percent terms, i.e., 10.22 for 10.22% and 11.44 for 11.442%.)

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter26: Monetary Policy

Section: Chapter Questions

Problem 5SQP

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