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According to the Taylor Rule, If Inflation Equals 3 Percent

Question 79

Multiple Choice

According to the Taylor rule, if inflation equals 3 percent and there is an expansionary gap equal to 3 percent of potential output, the Fed will set a real interest rate of ________ percent and a nominal interest rate of ________ percent.


A) 4; 7
B) 1; 4
C) 1; 3
D) 4; 6

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