Unformatted text preview: Question 6 1" 1 ”ts Assume the Federal Reserve's current target rate of inﬂation is 3% and the natural rate of
unemployment is 5%. According to the Taylor Rule, if the current rate of inﬂation is 1% and
the current unemployment rate is 4%, the federal funds rate should be _. 06% O 4.5% (9 1.5% Question 7 1 I 1 P“ What does rational expectation imply in the New Classical View of monetary policy.) 0 Monetary policy cannot aﬂectthe leyel ofintlation. ©
The ERAS shifts to a point where it intersects the new AD curve at the LRAS whenever policy is anticipated 0 Unanticipated policy changes cannot affect short run economic outcomes 0 The AD curve automatically shifts back to the original position as economic agents
anticipate the change in money supply ...
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