Suppose the Inflation Rate Is 3 Percent and the Output

question 142

Multiple Choice

Suppose the inflation rate is 3 percent and the output gap is - 1 percent. Assuming the equilibrium real interest rate is 2 percent, using the Taylor rule, what target should the Fed set for the federal funds rate?

• A) 5 percent
• B) 1 percent
• C) 6 percent
• D) 4 percent

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Definitions:

Elevation

The height above sea level at which a particular location on Earth's surface stands.

Latitude

A geographic coordinate that specifies the north-south position of a point on the Earth's surface.

Ocean Currents

Large-scale movements of seawater, driven by factors such as wind, salinity, and temperature gradients, playing a key role in climate and marine ecosystems.

Coniferous Forests

are dense, evergreen forests found in regions with long winters and short summers, primarily comprised of cone-bearing trees.