Essay
Suppose the federal funds rate is 4.4 percent and you know that the Fed is following the Taylor rule.You don't know the Fed's inflation target, but the equilibrium real interest rate is 4 percent, the inflation rate is 3 percent, the weight on the GDP gap is 0.4, the weight on the inflation gap is 0.6 and nominal GDP is 2 percent points below its target.Calculate the Fed's inflation target from this information.
Correct Answer:
Verified
The Taylor rule is given by the equation...View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q60: Suppose the economy is thought to be
Q61: Which of the following happened as a
Q62: Why are policymakers willing to use rules
Q63: New Zealand was the first country to
Q64: If the money supply is $300 billion,
Q65: When a central bank decreases money growth,
Q66: If a country's potential output is $100
Q67: Describe time inconsistency and explain how it
Q68: The rule that is used to set
Q69: Central banks that use inflation targeting usually