Suppose that in 1980, the U.S. inflation rate was 12.5 percent and the unemployment rate reached 7.4 percent. Suppose that the target rate of inflation was 2.5 percent back then and the full-employment rate of unemployment was 6 percent at that time. What value does the Taylor Rule predict for the Fed's target interest rate? Instructi

Macroeconomics: Private and Public Choice (MindTap Course List)
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ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter14: Modern Macroeconomics And Monetary Policy
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Suppose that in 1980, the U.S. inflation rate was 12.5 percent and the unemployment rate reached 7.4 percent. Suppose that the target
rate of inflation was 2.5 percent back then and the full-employment rate of unemployment was 6 percent at that time. What value does
the Taylor Rule predict for the Fed's target interest rate?
Instructions: Enter your answer rounded to 2 decimal places.
18.7 percent
Transcribed Image Text:Suppose that in 1980, the U.S. inflation rate was 12.5 percent and the unemployment rate reached 7.4 percent. Suppose that the target rate of inflation was 2.5 percent back then and the full-employment rate of unemployment was 6 percent at that time. What value does the Taylor Rule predict for the Fed's target interest rate? Instructions: Enter your answer rounded to 2 decimal places. 18.7 percent
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