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2.For the current year the inflation rate is 2%, the output gap is 3%, and the neutral real interest rate in 5%. a)What is the
2.For the current year the inflation rate is 2%, the output gap is 3%, and the neutral real interest rate in 5%.
a)What is the federal funds rate this year according to the Fed rule-of-thumb?
b)If the federal funds rate next year is 4%, is this expansionary or contractionary monetary policy?
c)With the change in the federal funds rate from part b), what happens to the money supply, interest rates, investment, and output?
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