The new chairman of the Ionian Central Bank (ICB) is preparing for her first board meeting. She is expected to recommend a monetary policy for the board to pursue. She decides to use the Taylor rule, which was originally developed for the U.S. Federal Reserve.Help look at imageTarget rate is wrong. how do I do it? Ionia's potential GDP is 100 million drachma, but current GDP is 94 million. What is lonia's output gap?Ionia's output gap: -6%Inflation is running at 5%, but the chairman considers an inflation rate of 3% to be a reasonable goal. What is Ionia'sinflation gap?Ionia's inflation gap: 2%The Taylor rule helps the chairman to determine the targetinflation rate.discount rate.fed funds rate.Calculate this target rate for Ionia, according to the Taylor rule.target rate: 6%

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Answered: Ionia's potential GDP is 100 million…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The new chairman of the Ionian Central Bank (ICB) is preparing for her first board meeting. She is expected to recommend a monetary policy for the board to pursue. She decides to use the Taylor rule, which was originally developed for the U.S. Federal Reserve.

Help look at image

Target rate is wrong. how do I do it?

Ionia's potential GDP is 100 million drachma, but current GDP is 94 million. What is lonia's output gap?
Ionia's output gap: -6
%
Inflation is running at 5%, but the chairman considers an inflation rate of 3% to be a reasonable goal. What is Ionia's
inflation gap?
Ionia's inflation gap: 2
%
The Taylor rule helps the chairman to determine the target
inflation rate.
discount rate.
fed funds rate.
Calculate this target rate for Ionia, according to the Taylor rule.
target rate: 6
%

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