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You are preparing a research report analyzing what a Taylor Rule implies for the target rate that the Federal Reserve should have. Suppose that inflation
You are preparing a research report analyzing what a Taylor Rule implies for the target rate that the Federal Reserve should have. Suppose that inflation is currently at the target goal (2.0%) and real GDP is at its potential output level. How much would the Taylor Rule suggest the target rate should be changed if inflation were to suddenly increase by 1.0 percentage points to 3.0%? Answer in percentage points. Refer to slide 10 in the "Interest Rates and Econ" presentation file.
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