7.) Consider the Taylor-Rule equation and the following values given:

t = the actual annual expected inflation rate at time t =?

* = the target annual expected inflation rate = 2.0%

yt = the actual annual GDP growth rate at time t = 3.5%

= the economy's potential annual GDP growth rate = 2.5%

r * = the neutral real fed funds rate = 2.0%

= .5

iFFt = the nominal Fed Funds target rate at time t = 6.5%

i)et's say that we know that: (iFFt) the nominal Fed Funds target rate at time t is = 6.5%, () is = .5, (r *) the neutral real fed funds rate is = 2%, (yt) actual annual GDP growth rate at time t is = 3.5%, and (y*) the economy's potential annual GDP growth rate is = 2.5%.