Consider the Monetary Rule

question 17

Multiple Choice

Consider the monetary rule
) If the inflation rate is 4 percent,the marginal product of capital is 2 percent,and the target rate of inflation is 3 percent,then the real interest rate should be:

• A)3.50 percent.
• B)3.25 percent.
• C)2.25 percent.
• D)1.75 percent.
• E)2.50 percent.

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