Potential output due to the slow recovery of the economy

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In 2012, the U.S. inflation rate was 2.1% and output was 4.8% below its long-run potential output due to the slow recovery of the economy. Assuming that the inflation target is 2% what would be the federal funds target rate if the FOMC used the Taylor rule? How does this compare to the actual federal duns rate of 0.1%?

Reference no: EM131167492

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Potential output due to the slow recovery of the economy : In 2012, the U.S. inflation rate was 2.1% and output was 4.8% below its long-run potential output due to the slow recovery of the economy. Assuming that the inflation target is 2% what would be the federal funds target rate if the FOMC used the Taylo..

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