Assuming the Fed is following the Taylor Rule, if inflation is 3 percent, target inflation is 2 percent, and output is 1 percent above potential, what would you predict would be the Fed funds rate target?
A)4 percent
B)5 percent
C)5.5 percent
D)6 percent

Question

Quizplus · Accepted Answer

The Answer of Assuming the Fed is following the Taylor Rule, if inflation is 3 percent, target inflation is 2 percent, and output is 1 percent above potential, what would you predict would be the Fed funds rate target?
A)4 percent
B)5 percent
C)5.5 percent
D)6 percent

Assuming the Fed Is Following the Taylor Rule, If Inflation