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

question 36

Multiple Choice

Suppose the inflation rate target is zero and the long-run federal funds target is also zero.If the federal funds rate set using the Taylor rule is 2 percent and output exceeds the trend output level by 1 percent,the inflation rate is ________.

• A) ‒0.5 percent
• B) 1 percent
• C) 2.5 percent
• D) 3 percent

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