According to the Taylor Rule, When the Economy Has a Zero-Unemployment

Multiple Choice

According to the Taylor rule, when the economy has a zero-unemployment gap and the inflation rate is equal to its target rate of 2 percent, the Fed's targeted interest rate should be

A) 2 percent, and this implies a real interest rate of 0 percent.
B) 2 percent, and this implies a real interest rate of 4 percent.
C) 4 percent, and this implies a real interest rate of 2 percent.
D) 4 percent, and this implies a real interest rate of 4 percent.