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.
If inflation goes up by 1 percentage points, the target (nominal) federal funds rate goes up by 2 percentage points 1 percentage points due to the direct impact of inflation and another 0.5 percentage points due to an increase in the inflation gap).
According to the Fisher equation, if the nominal rate increased by 2 percentage points and inflation increased by 1 percentage points, the real interest rate must have increased by 0.5 percentage points
Use the following Taylor rule to calculate what would happen to the real interest rate if...
Use the following Taylor rule to calculate what would happen to the real interest rate if inflation increased by 7 percentage points. Target federal funds rate = Natural rate of interest + Current inflation + 1/2(Inflation gap) + 1/2(Output gap) Use the following Taylor rule to calculate what would happen to the real interest rate if inflation increased by 7 percentage points. Target federal funds rate = Natural rate of interest + Current inflation + 1/2(Inflation gap) + 1/2(Output gap)...
Using the Taylor rule, calculate the target for the federal funds rate for July 2010 using the following information: Equilibrium real federal funds rate 2% Target inflation rate 2% Current inflation rate 0.9% Output gap -6%The target for the federal funds rate for July 2010 is _______ %. (Enter your response rounded to two decimal places and include a minus sign if necessary) In your calculations, the inflation gap is negative if the current inflation rate is below the target inflation rate. How does the...
Use the Taylor rule to: Calculate the target for the federal funds rate for October 2012, using the following information: equilibrium real federal funds rate of 2%, target inflation rate of 2%, current inflation rate of 1.2%, and a (negative) output gap of 5.9%. In your calculations, the inflation gap is negative if the current inflation rate is below the target inflation rate. How does the targeted federal funds rate calculated using the Taylor rule compare to the actual federal...
6. The Taylor rule Aa Aa Economist John B. Taylor found empirically that the Federal Reserve (the Fed) tended to follow a general rule for federal funds rate targeting: Federal Funds Target Rate (FFTarget) = 296 + Inflation Rate + [0.5 x (Inflation Gap)] + [0.5 x (Output Gap) Use this relationship to fil in the following table with the target federal funds rate the Fed will set, given the inflation rate, target inflation rate, and output gap percentage. Target...
1. Given the Taylor Rule, if nominal inflation is 4.3%, the FED target inflation rate is 2%, the real Fed Funds rate is 0.7%, the log of real output is 3.0155, and the log of potential output is 3.0445; what should the be the FED's Fed Funds target rate?
Suppose the real interest rate is 3% and expected inflation is 3%. What is the nominal interest rate?nominal interest rate: = _______ %All else equal, if inflation decreases by 0 %, what will happen to the nominal interest rate?The real interest rate will decrease by 0 %.The nominal interest rate will decrease by 0 %.The nominal interest rate will increase by 0 %.The real interest rate will increase by 0 %.What do economists call the relationship between the nominal interest...
10. The Taylor rule. Using the Taylor rule, for an inflation target of 2%, an equilibrium real interest rate of 2%, m-1, and inflation of 5%, what is the nominal interest rate according to the policy rule.
Given the Taylor Rule, if nominal inflation is 4.3%, the FED target inflation rate is 2%, the real Fed Funds rate is 0.7%, the log of real output is 3.0155, and the log of potential output is 3.0445; what should the be the FED’s Fed Funds target rate?
According to the Taylor Rule, if the inflation rate is 3 percent and the GDP gap is 2 percent, what does the federal funds rate target equal? Group of answer choices 8.5 percent 5.5 percent 3.5 percent 6.5 percent
Based on the Taylor Rule use the following information to calculate the target federal funds rate. In this case, the Federal funds target rate is _______ percent.