Explain all option plz......you will not explain all option then I will give you down upvote... You are the Chair of the Federal Reserve Bank of the United States. The neutral rate of interest is 2%, the inflation rate is1%, and the output gap is -0.5%. Using the Fed's rule of thumb, what is the appropriate new nominal federal funds rate thatyou should set for the economy?1%0.5%2%3%

The federal funds rate is the interest rate at which depository institutions (such as banks and…

Answered: You are the Chair of the Federal…

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: Money Growth And Intlation

Section17.1: The Classical Theory Of Inflation

Problem 1QQ

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The income elasticity of money demand is ny = 0.7 and the interest rate elasticity of money demand is n₁ = -0.06. Suppose that the central bank increases the money supply by 2.6%, real income increases by 2% and inflation is 3%. What is the percentage increase in the nominal interest rate? -0.3 (or -30%) 0.3 (or 30%) -0.1 (or -10%) 0.1 (or 10%)
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You are the Chair of the Federal Reserve Bank of the United States. The neutral rate of interest is 2%, the inflation rate is 1%, and the output gap is -0.5%. Using the Fed's rule of thumb, what is the appropriate new nominal federal funds rate that you should set for the economy? 1% 0.5% 2% 3%