Using Taylor's Rule, When the Equilibrium Real Overnight Rate Is

question 116

Multiple Choice

Using Taylor's rule, when the equilibrium real overnight rate is 3 percent, the positive output gap is 2 percent, the target inflation rate is 1 percent, and the actual inflation rate is 2 percent, the nominal overnight rate target should be ________.

• A) 5 percent
• B) 5.5 percent
• C) 6 percent
• D) 6.5 percent

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