Suppose that in 1980, the U.S. inflation rate was 13.5 percent and the unemployment rate reached 7.8 percent. Suppose that the target rate of inflation was 3 percent back then and the full-employment rate of unemployment was 5.5 percent at that time. What value does the Taylor Rule predict for the Fed’s target interest rate?
Suppose that in 1980, the U.S. inflation rate was 13.5 percent and the unemployment rate reached 7.8 percent. Suppose that the target rate of inflation was 3 percent back then and the full-employment rate of unemployment was 5.5 percent at that time. What value does the Taylor Rule predict for the Fed’s target interest rate?
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter15: Monetary Policy
Section: Chapter Questions
Problem 10QP
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Suppose that in 1980, the U.S. inflation rate was 13.5 percent and the unemployment rate reached 7.8 percent. Suppose that the target rate of inflation was 3 percent back then and the full-employment rate of unemployment was 5.5 percent at that time. What value does the Taylor Rule predict for the Fed’s target interest rate?
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