The inflation rate $($pi$\_$t$)$ is $4\%,$ the target inflation rate $($pi$*)$ is $2\%,$ the output gap is $-2\%,$ and the neutral real interest rate $($r$*)$ is $1\%.$ Using the standard Taylor rule, what is the interest rate $($i$\_$t$)?$

Question $11$Answer

a$.$

$3\mathrm{.}0\%$

b$.$

$4\mathrm{.}0\%$

c$.$

$5\mathrm{.}0\%$

d$.$

$6\mathrm{.}0\%$