Use the following Taylor rule to calculate what would happen to the real interest rate if inflation increased by 1 percentage points. Target federal funds rate = Natural rate of interest + Current inflation + 1/2(Inflation gap) + 1/2(Output gap) Instructions: Enter your responses rounded to one decimal place. If inflation goes up by 1 percentage points, the target (nominal) federal funds rate goes up by ____ percentage points (____ percentage points due to the direct impact of inflation and another ____ percentage points due to an increase in the inflation gap).

According to the Fisher equation, if the nominal rate increased by ___ percentage points and inflation increased by ___ percentage points, the real interest rate must have increased by ____ percentage points.