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The Federal Reserve Open Market Committee has an upcoming meeting at which it may set a new federal funds rate target. You're an economist for
The Federal Reserve Open Market Committee has an upcoming meeting at which it may set a new federal funds rate target. You're an economist for Amazon, and you're trying to determine where the federal funds rate will go. The neutral real interest rate is 0.5%, inflation is 4%, and the output gap is 2%. According to the Fed rule-of-thumb (the Taylor rule), the Fed should aim for a real interest rate of _____% by setting the federal funds rate at _____%. Question 10 options: a) 0.75; 1.75 b) 1.5; 3.5 c) 3.5; 7.5 d) 2.5; 4.5
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