Given the monetary policy rule, r = p + 0.5Y^{^}+ 0.5p - p*) + 3 and Assuming Y^{^}= 0 and p = p*, let inflation increase by 2 percentage points. By how much would the Fed increase interest rates? A) 6 percentage points B) 2 percentage points C) 3 percentage points D) 5 percentage points E) Less than 2 percentage points

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The Answer of Given the monetary policy rule, r = p + 0.5Y^{^}+ 0.5p - p*) + 3 and Assuming Y^{^}= 0 and p = p*, let inflation increase by 2 percentage points. By how much would the Fed increase interest rates? A) 6 percentage points B) 2 percentage points C) 3 percentage points D) 5 percentage points E) Less than 2 percentage points

Given the Monetary Policy Rule, R = P + 0