Suppose the Fed commits itself to the use of the Taylor rule (shown below) to set...

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Suppose the Fed commits itself to the use of the Taylor rule (shown below) to set the federal funds rate. Federal funds rate = Long-run target + 1.5(Inflation rate - Inflation target) + 0.5(Output gap) Suppose the Fed has set the long-run target for the federal funds rate at 1.5 percent and its target for inflation at 1.5 percent. If the economy is currently hitting the Fed's inflation target and GDP exactly equals the trend GDP, then the Fed will set the federal funds rate at percent. (Enter your response with no rounding.) Suppose the Fed commits itself to the use of the Taylor rule (shown below) to set the federal funds rate. Federal funds rate = Long-run target + 1.5(Inflation rate - Inflation target) + 0.5(Output gap) Suppose the Fed has set the long-run target for the federal funds rate at 1.5 percent and its target for inflation at 1.5 percent. If the economy is currently hitting the Fed's inflation target and GDP exactly equals the trend GDP, then the Fed will set the federal funds rate at percent. (Enter your response with no rounding.)

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Based on the given information if the economy is currently ... View the full answer