Suppose that the next FOMC meeting is coming up in a few days and the official inflation and output gap numbers have just been released. The current federal funds rate is 1.25​%, the​ long-term fed funds rate target is 3.25%, and the inflation rate target is 2%. According to the​ release, inflation is currently at 1.25 percent and the output gap is​ -0.5 percentage points. Given the information​ above, the expected federal funds rate is _____ percent.

Q: Suppose you have the following information on the Fed's and the European Central Bank's (ECB) policy…

A: Monetary policy rules are formulas that central banks, like the Fed and the ECB, use to determine…

Q: Continuing to work with a 2% inflation target, a 1999 version of the Taylor Rule and an initial…

A: Since the question you have posted consists of multiple parts, we will answer the first three parts…

Q: Assume the following: Current Actual Inflation Rate = 2% Potential Real GDP = 100,000 Actual Real…

A: Taylor's rule The rule suggests a relationship between the nominal interest rate, the inflation…

Q: Suppose that the equilibrium real federal funds rate is 2.75% and the target inflation rate is…

A: Taylor rule: It refers to the rule that helps the Federal Reserve to decide whether they want to…

Q: Now go to FRED and search for PCEPI. This is the price index that receives the most attention from…

A: Personal consumption expenditures price index, or PCEPI, is a metric used in the United States to…

Q: If the actual inflation rate is greater than the target inflation rate, then relative to the neutral…

A: Taylor Rule proposes how interest rates should be changed by the Federal Reserve to counter…

Q: Using Taylor's rule, when the equilibrium real federal funds rate is 2 percent, the positive output…

A: please find the answer below.

Q: The South African Reserve Bank (SARB) left its key repo rate unchanged at a 14-year high of 8.25%…

A: SA's economic situation is difficult and multifaceted, with recent developments prompting a detailed…

Q: Consider the following:  C = 400 + 0.5·(Y – T)  I = 80 + 0.1·Y – 1000·(i – πe + x) NX = 0.01·Y*–…

A: Given, C = 400 + 0.5·(Y – T)I = 80 + 0.1·Y – 1000·(i – πe + x)NX = 0.01·Y*– 0.1·Y – 4·(E – 100)G =…

Q: a. How might fears of a zero lower bound justify such a policy, even if the economy was not actually…

A: Given:In 2003, as the U.S. economy finally seemed poised to exit its ongoing recession, the Fed…

Q: Suppose the actual federal funds rate is equal to the rate implied by a particular inflation goal.…

A: The central bank of the economy works towards maintaining price stability and maximum sustainable…

Q: The money supply of a country has been growing for many years causing expected inflation of 8% per…

A: The Taylor rule formula is a formula that helps central banks in choosing the federal funds rate…

Q: the long-run federal funds target is also zero. If the inflation rate is 4 percent and the output…

A: Federal funds rate = long run target+ 1.5(inflation rate – inflation target) + 0.5(output gap)…

Q: Suppose that the current real federal funds rate in the economy is 2.0%, the current inflation rate…

A: According to the Taylor Rule, the FF Target = Real FF Rate + Inflation Rate + 0.5(Inflation Gap) +…

Q: Based on the below, what is currently happening in the economy and what FED response is expected?…

A: Since real GDP is higher than potential GDP, as well as actual inflation rate is much higher than…

Q: Suppose the inflation rate target is zero and the long-run federal funds target is also zero. If the…

A: (Q) Suppose the inflation rate target is zero and the long-run federal funds target is also zero. If…

Q: Suppose that the equilibrium real federal funds rate is 6 percent and the target rate of inflation…

A: The Taylor Rule is a guideline for central banks to set interest rates based on economic conditions.…

Q: Compute the target fed funds rate if the equilibrium fed funds rate is 1% current inflation is 1%…

A: The term "target funds rate" refers to the interest rate set by a central bank as a target for…

Q: Which of the following are reasons why the Fed targets an inflation rate greater than 0%? Inflation…

A: Inflation measures the rate at which the general price level in an economy rises.

Q: Consider the following:  C = 400 + 0.5·(Y – T)  I = 80 + 0.1·Y – 1000·(i – πe + x) NX = 0.01·Y*–…

A: A) Y = C +I + G + (X -M)    C = 400 + 0.5( Y- T)        = 400 + 0.5 Y - 240    I = 80+0.1Y -1000(i -…

Q: If the money supply is growing at a rate of 6 percent per year, real GDP (real output) is growing at…

A: The velocity of cash can be determined as the proportion of ostensible GDP (GDP) to the cash supply,…

Q: Suppose that the equilibrium real federal funds rate is 4 percent and the target rate of inflation…

A: The federal funds rate is the overnight interest rate at which depository institutions (such as…

Q: Continuing to work with a 2% inflation target, a 1999 version of the Taylor Rule and an initial…

A: A nominal interest rate alludes to the interest rate prior to considering inflation. It is the…

Q: Current Actual Inflation Rate = 6% (like these days) Potential Real GDP=100,000 Actual Real…

A: The Taylor rule is given as,i* = π + 2 + 0.5(π - 2) + 0.5(GDP gap)where,i* = nominal federal funds…

Q: The income elasticity of money demand is ny = 0.7 and the interest rate elasticity of money demand…

A: Macroeconomic analysis offers a comprehensive outlook on the financial terrain of entire economies.…

Q: Compared to predicted inflation of 3.2%, the risk-free rate is 4.8%. What will the new risk-free…

A: The rate of return on a hypothetical investment with regular payments made over a set period of time…

Q: Suppose that the equilibrium real federal funds rate is 1 percent and the target rate of inflation…

A: The Taylor rule is a monetary policy guideline that suggests how central banks should adjust…

Q: ppose that the equilibrium real federal unds rate is Current inflation rate = 2 percent Potential…

A: Fedral fund target rate is the  rate at which commercial banks borrow and lend their excess reserves…

Q: Assume the inflation rate is 6% and there is every indication that price levels will continue to…

A: The Federal Reserve (the Fed) normally employs contractionary monetary policy to manage inflation…

Q: Scenario: The South African Reserve Bank (SARB) left its key repo rate unchanged at a 14-year high…

A: The economic environment in South Africa is tough and complicated, with recent events necessitating…

Q: Use the Taylor rule to determine the target federal funds rate if current inflation is 2% and real…

A: Taylor Rule: The Taylor Rule is a monetary policy guideline or formula used by a central banks, such…

Q: The Bank of Sweden inflation target is 2 % - which is a very common central bank goal. Why is it not…

A: Inflation rate refers to the general rise in the inflation rate. The inflation rate is worrisome for…

Q: Actions by the Fed to fight rising rates of inflation likely will initially: (a) reduce long-term…

A: In an economy, it can be seen that a monetary policy is generally beneficial in the short-run due to…

Q: With a policy of nominal GDP targeting, if the Fed expected 6% growth in real GDP and wanted an…

A: Relationship between nominal GDP, real GDP, and price level.  Nominal GDP = Real GDP * Price level.…

Q: According to the policy statement of September 2020, the Federal Reserve's current inflation target…

A: According to the policy statement of september 2020, the federal reserve current inflation target is…