If the Current Rate of Inflation Is 4 Percent, Using $\bar { r } = 2 \% ; \bar { r } = 2 \% ; \bar { m } = 1 / 2 \% ,$

Multiple Choice

If the current rate of inflation is 4 percent, using the values suggested by Professor Taylor, $\bar { r } = 2 \% ; \bar { r } = 2 \% ; \bar { m } = 1 / 2 \% ,$ the Taylor rule predicts a federal funds rate of:

A) 1 percent
B) 4.5 percent
C) 3 percent
D) 4 percent
E) 0.5 percent