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Suppose the Equilibrium Real Overnight Interest Rate Is 2 Percent

question 278

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Suppose the equilibrium real overnight interest rate is 2 percent, the target rate of inflation is 2 percent, the current inflation rate is 4 percent, and real GDP is 2 percent above potential real GDP.If the weights for the inflation gap and the output gap are both 1/2, then according to the Taylor rule the overnight interest target rate equals

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Definitions:

Interlocking Minerals

Minerals that grow together and interlock their crystals, often found in igneous rocks.

Eroded Rocks

Rocks that have been worn down or broken apart by the forces of weathering and erosion.

Cleavage

The tendency of a mineral to break along smooth flat surfaces according to its crystal structure.

Luster

The way a mineral reflects light from its surface, which can be metallic, glassy, dull, etc., and is used in mineral identification.

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