In the economy of Callumtaylia, the current inflation rate is 6 percent and the Central Bank's target inflation rate is 2 percent. Real GDP exceeds potential GDP by 1 percent, and the long- term growth rate of real GDP is 5 percent. The medium- term growth rate of the velocity of circulation of the monetary base is 2 percent.
a) According to the McCallum rule, what growth rate of the economy's monetary base should the Central Bank
b) According to the Taylor rule, what federal funds rate should the Central Bank set?
c) What are two major differences between the McCallum rule and the Taylor rule?

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The Answer of In the economy of Callumtaylia, the current inflation rate is 6 percent and the Central Bank's target inflation rate is 2 percent. Real GDP exceeds potential GDP by 1 percent, and the long- term growth rate of real GDP is 5 percent. The medium- term growth rate of the velocity of circulation of the monetary base is 2 percent.
a) According to the McCallum rule, what growth rate of the economy's monetary base should the Central Bank
b) According to the Taylor rule, what federal funds rate should the Central Bank set?
c) What are two major differences between the McCallum rule and the Taylor rule?

In the Economy of Callumtaylia, the Current Inflation Rate Is