QUESTION 8 Consider the following Taylor rule i=0.02+0.75y+0.25(n– 2% ) Notice that the central bank puts a higher policy weight on output than inflation. Imagine that inflation is 2%. How large...

Extracted text: QUESTION 8 Consider the following Taylor rule i=0.02+0.75y+0.25(n– 2% ) Notice that the central bank puts a higher policy weight on output than inflation. Imagine that inflation is 2%. How large should be the decline in output relative to the full-employment level for the central bank to hit the zero lower bound? O A. 0.00% O B. 1.27% O C. 2.67% O D.4.00%