Suppose that the equilibrium real federal funds rate is 4 percent and the target rate of inflation is 1 percent. Use the following information and the Taylor rule to calculate the federal funds rate target: Current inflation rate = 6 percent Potential real GDP = $14.28 trillion Real GDP = $14.29 trillion The federal funds target rate is % (Enter your response rounded to two decimal places.)

Suppose that the equilibrium real federal funds rate is 4 percent and the target rate of inflation is 1 percent. Use the following information and the Taylor rule to calculate the federal funds rate target: Current inflation rate = 6 percent Potential real GDP = $14.28 trillion Real GDP = $14.29 trillion The federal funds target rate is % (Enter your response rounded to two decimal places.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

K
Suppose that the equilibrium real federal funds rate is 4 percent and the target rate of inflation is 1 percent. Use the
following information and the Taylor rule to calculate the federal funds rate target:
Current inflation rate = 6 percent
Potential real GDP = $14.28 trillion
Real GDP $14.29 trillion
=
The federal funds target rate is
% (Enter your response rounded to two decimal places.)

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