Based on the taylor rule use the following information to calculate the target federal funds rate.
variable value target inflation rate: 2 percent
current inflation rate : 10 percent
real equilibrium federal funds rate : 2 percent
output gap: 8 percent

question: in this case, the federal funds target rate is: (round your solution to one decimal place.)

Based on the Taylor Rule, the formula for calculating the Federal target rate is:

Federal funds rate target = equilibrium real federal funds rate + inflation rate + 1/2(output gap) + 1/2(inflation gap) 

We are given that:

equilibrium real federal funds rate = 2%

inflation rate = 10%

output gap = 8%

inflation gap = 10% - 2% = 8%

Substituting to the equation:

Federal funds rate target = 2% + 10% + 0.5*8% + 0.5*8%

Federal funds rate target = 20%

answer; the nav calculated at the market close at 4: 00 pm new york time;

answer; yield to maturity;