# 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.

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.

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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