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Federal funds rate recommended

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Question

Use the following information for a Taylor rule. The equilibrium federal funds rate is 2%, the inflation target is 2% and the output growth target is 3%. Write the Taylor rule with weights of 0.5 on the output and inflation gaps. If actual inflation is 10% and actual output growth is 1%, find the federal funds rate recommended by the Taylor rule.

Reference no: EM132337061

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