Use the Fed rule-of-thumb to predict the Fed's target for the federal funds rate and the...

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Use the Fed rule-of-thumb to predict the Fed's target for the federal funds rate and the real target interest rate t for each of the following scenarios if its estimate of the neutral real interest rate is 2%. a. A recession hits the economy, causing output to fall to 0.75% below potential output and inflation to fall to 1%. Federal funds target rate % Target real interest rate: b. An increase in consumer and business confidence pushes output to 2% above potential output, while inflation rises to 3.5%. Federal funds target rate % Target real interest rate: % % Use the Fed rule-of-thumb to predict the Fed's target for the federal funds rate and the real target interest rate t for each of the following scenarios if its estimate of the neutral real interest rate is 2%. a. A recession hits the economy, causing output to fall to 0.75% below potential output and inflation to fall to 1%. Federal funds target rate % Target real interest rate: b. An increase in consumer and business confidence pushes output to 2% above potential output, while inflation rises to 3.5%. Federal funds target rate % Target real interest rate: % %