Consider the Monetary Rule $R _ { t } - \bar { r } = 0.25 \left( \pi _ { t } - \bar { \pi } \right)$

question 104

Multiple Choice

Consider the monetary rule $R _ { t } - \bar { r } = 0.25 \left( \pi _ { t } - \bar { \pi } \right)$ . 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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Definitions:

Marital Status

A legal or social recognition of a person's relationship status, often categorized as single, married, divorced, or widowed.

Independent

When two events or variables have no direct influence on each other in a statistical context.

Conditional Probability

The probability of an event occurring given the occurrence of another event.

P(A And B)

The likelihood of both events A and B happening simultaneously.