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Taylor RulesSuppose the target rate of inflation is 6%, the current inflation rate is 1%, the ...

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Taylor RulesSuppose the target rate of inflation is 6%, the current inflation rate is 1%, the ...

Taylor Rules

Suppose the target rate of inflation is 6%, the current inflation rate is 1%, the equilibrium real federal funds rate is 2%, and real GDP is 4% below 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.)

▸ 2.5%

▸ 5%

▸ -1.5%

▸ -3%

Textbook

Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

Read 37 times

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