In 2012, the U.S. inflation rate was 2.1% and output was 4.8% below its long-run potential output

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In 2012, the U.S. inflation rate was 2.1% and output was 4.8% below its long-run potential output due to the slow recovery of the economy. Assuming that the inflation target is 2%, what would be the federal funds target rate if the FOMC used the Taylor rule? How does this compare to the actual federal funds rate of 0.1%?

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Core Macroeconomics

ISBN: 978-1464191435

3rd edition

Authors: Eric Chiang

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Question Posted: Dec 08, 2015 05:54 AM

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In 2012, the U.S. inflation rate was 2.1% and output was 4.8% below its long-run potential output

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The Taylor rule says that the target federal funds rate should be ...View the full answer

Core Macroeconomics

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