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

Multiple Choice

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

A) 0 percent
B) 1.5 percent
C) 1 percent
D) 0.5 percent
E) 3.5 percent