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Taylor RulesSuppose the target rate of inflation is 3%, the current inflation rate is 7%, the ...

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Taylor RulesSuppose the target rate of inflation is 3%, the current inflation rate is 7%, the ...

Taylor Rules

Suppose the target rate of inflation is 3%, the current inflation rate is 7%, the equilibrium real federal funds rate is 1%, and real GDP is 1% above potential real GDP. If the weights for both the output gap and the inflation gap are 1/2, then according to the Taylor rule the federal funds target rate equals ________. (Round to the nearest tenth when appropriate.)

▸ 6%

▸ 4%

▸ 12%

▸ 10.5%

Textbook

Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

Read 34 times

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Smart ... Thanks!

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