Consider the Taylor Rule for the Target of the Federal

question 50

Essay

Consider the Taylor rule for the target of the federal funds rate.Suppose the equilibrium real federal funds rate is 2 percent,the target rate of inflation is 3 percent,the current inflation rate is 3 percent,real GDP equals potential real GDP,and the weights are 1/2 for the inflation gap and the output gap.Using the Taylor rule,what does the target for the federal funds rate equal? Next,if the Federal Reserve lowered the target for the inflation rate to 1 percent,how much would the target for the federal funds rate change?

---

Definitions:

Internal Injury

Damage occurring within the body, often invisible from the outside, that can affect organs, muscles, or bones.

Personal Protective Equipment (PPE)

Specialized clothing or equipment worn for protection against health and safety hazards, includes masks, gloves, gowns, and eye protection.

Level Of Protection

The degree or extent to which something is safeguarded or defended against harm or danger.

Smallpox Immunization

The process of vaccinating an individual against smallpox, a serious and potentially deadly infectious disease, now eradicated thanks to global immunization efforts.