Taylor Rule Suppose that the Federal Reserve sets the target Federal Funds Rate by following the Taylor rule: iFFR=p+-+56-5)+(- -) where . Equilibrium interest rate - Optimal inflation rate . - Actual inflation rate . y - Potential output y - Actual output *) Explain how the dual mandate of the Fed (price stability and maximum employment) is reflected in the Taylor rule. b) In March 2020, anticipating the economic contraction sparked by the pandemie, the Fed cuts the federal funds rate from 1.5% to 1.75% down to 0% to 0.25%. Explain why this rate cut by the Fed is consistent with the Taylor rule. Taylor Rule Suppose that the Federal Reserve sets the target Federal Funds Rate by following the Taylor rule: iFFR=p+-+56-5)+(- -) where . Equilibrium interest rate - Optimal inflation rate . - Actual inflation rate . y - Potential output y - Actual output *) Explain how the dual mandate of the Fed (price stability and maximum employment) is reflected in the Taylor rule. b) In March 2020, anticipating the economic contraction sparked by the pandemie, the Fed cuts the federal funds rate from 1.5% to 1.75% down to 0% to 0.25%. Explain why this rate cut by the Fed is consistent with the Taylor rule