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Assume the following: The neutral rate of interest is 3% Actual real GDP growth is 3.5% while trend growth is 2.5% Actual inflation is 7%
Assume the following: The neutral rate of interest is 3% Actual real GDP growth is 3.5% while trend growth is 2.5% Actual inflation is 7% whereas the target inflation is 2.0% If the Taylor Rule is followed, what should be the optimal Fed Funds Rate? IMPORTANT: Enter your answer in a whole number with one decimal and don't add the "%" sign. For instance, if your answer is 1.54%, enter 1.5. If you enter the answer incorrectly but otherwise get the problem correct, then contact me and I will provide 1/2 credit (as directions weren't followed but you did the calculation correctly). It is important to have attention to detail in business so 1/2 credit must be
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