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Suppose the Equilibrium Real Federal Funds Rate Is 2 Percent,the

Question 267

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Suppose the equilibrium real federal funds rate is 2 percent,the target rate of inflation is 2 percent,the current inflation rate is 4 percent,and real GDP is 2 percent above potential real GDP.If the weights for the inflation gap and the output gap are both 1/2,then according to the Taylor rule the federal funds target rate equals


A) 4 percent.
B) 6 percent.
C) 8 percent.
D) 10 percent.

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