Suppose the Inflation Rate Target Is Zero and the Long-Run

question 47

Multiple Choice

Suppose the inflation rate target is zero and the long-run federal funds target is also zero.If the inflation rate is 4 percent and the output gap is ‒2 percent,the federal funds rate set by the Taylor rule is ________.

• A) 5 percent
• B) 6 percent
• C) 2 percent
• D) 8 percent

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Definitions:

Coefficient Of Determination

A statistical measurement that assesses the proportion of the variance in the dependent variable that is predictable from the independent variable(s).

SST

Abbreviation for "Total Sum of Squares," which measures the total variance in a dataset.

SSE

Total of the squared differences between the actual data and the estimated values from a model, illustrating model accuracy.

Coefficient Of Determination

A statistical measure represented as R², which indicates the proportion of the variance in the dependent variable that is predictable from the independent variable(s).