Assume That Targeted Inflation Is 1 Percent

Multiple Choice

Assume that targeted inflation is 1 percent.According to the Taylor rule,the federal funds rate is:

A) equal to 2 percent if inflation and output are at their target level.
B) equal to 6 percent if inflation is 3 percent,output is at its target level and the Fed's targeted federal funds rate is 2 percent.
C) equal to 4 percent if inflation is 2 percent ,output is 2 percent above its target level and the Fed's targeted federal funds rate is 2 percent.
D) none of the above are correct.