Assume inflation is currently 8%, but the inflation target that the central bank has announced is...

 

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Assume inflation is currently 8%, but the inflation target that the central bank has announced is only 2%. Assume the long run FFR target is 2%. Hint: Recall the Taylor rule equation: FFR = Long run FFR target + inflation rate +0.5(inflation rate - inflation target) + 0.5(output gap in percentage points) If the economy is currently at full employment, the central bank should set the federal funds rate at de % If the economy is currently 2% above trend GDP, the central bank should set the federal funds rate at % If the economy is currently 4% below trend GDP. the central bank should set the federal funds rate at 1 % Assume inflation is currently 8%, but the inflation target that the central bank has announced is only 2%. Assume the long run FFR target is 2%. Hint: Recall the Taylor rule equation: FFR = Long run FFR target + inflation rate +0.5(inflation rate - inflation target) + 0.5(output gap in percentage points) If the economy is currently at full employment, the central bank should set the federal funds rate at de % If the economy is currently 2% above trend GDP, the central bank should set the federal funds rate at % If the economy is currently 4% below trend GDP. the central bank should set the federal funds rate at 1 %

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