suppose the the equilibrium real federal funds rate is 4 percent and the target rate of inflation of 3 percent. Use the following information and the Taylor rule to calculate the federal funds rate target. Suppose that the equilibrium real federal funds rate is 4 percent and the target rate of inflation is 3 percent. Use the following information and theTaylor rule to calculate the federal funds rate target:Current inflation rate = 5 percentPotential real GDP = $14.65 trillionReal GDP = $14.32 trillionThe federal funds target rate is%. (Enter your response rounded to two decimal places.)

Economic equilibrium may likewise be characterized as the cost at which supply approaches demand for…

suppose the the equilibrium real federal funds rate is 4 percent and the target rate of inflation of 3 percent. Use the following information and the Taylor rule to calculate the federal funds rate target.

suppose the the equilibrium real federal funds rate is 4 percent and the target rate of inflation of 3 percent. Use the following information and the Taylor rule to calculate the federal funds rate target.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter17: The Trade-off Between Inflation And Unemploy

Section: Chapter Questions

Problem 7DQ

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Question

Suppose that the equilibrium real federal funds rate is 4 percent and the target rate of inflation is 3 percent. Use the following information and the
Taylor rule to calculate the federal funds rate target:
Current inflation rate = 5 percent
Potential real GDP = $14.65 trillion
Real GDP = $14.32 trillion
The federal funds target rate is
%. (Enter your response rounded to two decimal places.)

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