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Suppose the Fed targets for an inflation of 2%. She projects an economic growth rate of 3%. The current real interest rate is 4%. a.

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Suppose the Fed targets for an inflation of 2%. She projects an economic growth rate of 3%. The current real interest rate is 4%. a. Suggest the long-run money supply growth rate for the Fed. Briefly explain your answer. (5 marks) What should be the corresponding targeted federal fund rate? Briefly explain your answer. (5 marks) b

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