Greg, a supervisor, is known by his managers to be sharp in his decisions and has a good track record of meeting his goals. greg
1 answer:
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Answer:
The nominal federal funds rate be changed to 3%
Explanation:
Hi, in order to find the new nominal federal fund rate, we have to use the following equation.
Where:
I = Nominal fed funds rate (what we are looking for)
R*=Real federal funds rate (changed from 1% to 3%, we use 3%)
PI= Rate of inflation (current inflation, in our case, 1%)
PI*=Target inflation (expected inflation, 3%)
Everything should look like this.
I = 3% + 1% + 0.5(1% - 3%)
I = 4% - 0.5(-2%)
I = 4% - 1%
I = 3%
So the nominal federal funds rate should be 3% under this problem´s conditions.
Best of luck.