Question: State the Taylor rule. What does the rule predict will happen to the Fed funds rate in each of the following situations? a. Inflation is

State the Taylor rule. What does the rule predict will happen to the Fed funds rate in each of the following situations?
a. Inflation is 2 percent, the inflation target is 3 percent, and output is 2 percent below potential.
b. Inflation is 4 percent, the inflation target is 2 percent, and output is 3 percent above potential.
c. Inflation is 4 percent, the inflation target is 3 percent, and output is 2 percent below potential.

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