Complete the following equation for the Taylor rule:
Federal funds target rate = inflation rate ( x inflation gap) ( x output gap)
Suppose that the inflation target is 3% and the output growth target is 4%.
If actual inflation is 5% and the output growth rate is 6%, the inflation gap is and the output gap is .
Suppose that the inflation target is 3% and the output growth target is 4%.
How much should the federal funds target rate be? %
Suppose that the inflation target is 3% and the output growth target is 4%.
If actual inflation is 1% and the output growth rate is 2%, the inflation gap is and the output gap is .
Suppose that the inflation target is 3% and the output growth target is 4%.
How much should the federal funds rate target be? %
According to the Taylor rule, then, interest rates are lower when inflation is and output growth is .