Suppose the equilibrium real federal funds rate is 1 percent, the target inflation rate is 2 percent, the current inflation rate is 0.8 percent, and…
Suppose the equilibrium real federal funds rate is 1 percent, the target inflation rate is 2 percent, the current inflation rate is 0.8 percent, and real GDP is 0.8 percent above the potential real GDP level. If the weights for the inflation gap and the output gap are both 1/2, then according to the Taylor Rule the federal funds target rate is
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