Suppose the Inflation Rate Is 3 Per Cent and the Output

Suppose the inflation rate is 3 per cent and the output gap is - 1 per cent. Assuming the equilibrium real interest rate is 2 per cent, using the Taylor rule what target should the Reserve Bank set for the cash rate?

A) 4 per cent
B) 1 per cent
C) 6 per cent
D) 5 per cent