If the Equilibrium Real Fed Funds Rate and the Inflation

question 44

Short Answer

If the equilibrium real fed funds rate and the inflation target are 2%, actual inflation is 4%, and the output gap is 1%, find the federal funds rate recommended by the Taylor Rule.

---

Definitions:

Net Asset Value

Net Asset Value (NAV) is the per-share value of a mutual fund or ETF, calculated by dividing the total value of all the assets in the portfolio, minus liabilities, by the number of shares outstanding.

Liabilities

Liabilities are financial obligations or debts that a company or an individual owes, which are expected to be paid in the future.

Market Value

Market value is the current value at which an asset, company, or security can be bought or sold in the marketplace, determined by supply and demand dynamics.

Sales Commission

A payment made to a salesperson or broker for facilitating a sale, typically calculated as a percentage of the sale price.