110) Suppose the equilibrium real interest rate is 2 percent per year, inflation is 2.5 percentand the output gap is 1 percent. Using the Taylor rule, what is the federal funds rate?A) 3 percentB) 3.5 percentC) 5.25 percentD) 5.5 percentAnswer: C

The federal funds rate is the target interest rate set by the Fed at which commercial banks borrow…

Answered: Suppose the and the output gap is 1…

Suppose the and the output gap is 1 percent. Using the Taylor rule, what is the federal funds rate? A) 3 percent B) 3.5 percent C) 5.25 percent D) 5.5 percent Answer: C percent per

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter15: Monetary Theory And Policy

Section: Chapter Questions

Problem 4.9P

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Question

110) Suppose the equilibrium real interest rate is 2 percent per year, inflation is 2.5 percent
and the output gap is 1 percent. Using the Taylor rule, what is the federal funds rate?
A) 3 percent
B) 3.5 percent
C) 5.25 percent
D) 5.5 percent
Answer: C

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