Business, 11.10.2019 22:10 ChefCurtis

If real gdp is 2% below potential gdp, and the inflation rate is 1%, then according to the taylor rule, the fed should make the real federal funds rate:

a. decrease by 1.5%
b. decrease by 3%
c. increase by 3%
d. decrease by 1%

the answer is a. decrease by 1.5%. give a detailed explanation why.

Answers: 2

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If real gdp is 2% below potential gdp, and the inflation rate is 1%, then according to the taylor ru...