Answered: Calculate the Federal Funds rate for…

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter13: Inflation

Section: Chapter Questions

Problem 14SQ

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Question

Calculate the Federal Funds rate for the following values of expected growth in real GDP and inflation. Assume that, as above, long-term real GDP growth is 3% and steady-state (or target) inflation is 2%.

1. Expected growth in real GDP = 5%; inflation = 5%

2. Expected growth in real GDP = 1%; inflation = 0%

3. Expected growth in real GDP = 3%; inflation = 2%

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Expected growth in real GDP = 2%; inflation = 1%

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Expected growth in real GDP = 0%; inflation = 3%

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Expected growth in real GDP = 1%; inflation = 4%

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Expected growth in real GDP = -2%; inflation = 1%

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Expected growth in real GDP = 4%; inflation = 2%

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