1) What was the Fed Funds Rate during 2004 Q2 (the fed funds rate is referred to as 'effective federal funds rate' and is in daily, weekly, monthly data. Just pick a number that represents what it was during this quarter, i.e., April to June 2004)

2) What was inflation during this time period. You will need to use the 'Gross Domestic Product: Implicit Price Deflator'. This is an index and you will need to use it to calculate the inflation rate using the formula we discussed in class. Use the index at 2003 Q2 and 2004 Q2 to calculate the inflation rate

3) What was real gross domestic product in 2004 Q2

4) What was `Real Potential Gross Domestic Product' in 2004 Q2

5) What was the Output Gap (this is the percentage different in (3) and (4), in this case it will be negative)

6) Given (2), (3), and (5), what `should' have been the Fed Funds Rate according to the Taylor Rule

7) Was the Fed doing too much or too little if we think the Taylor rule is the `right' Fed Funds Rate.

PreviousNext