Suppose that inflation is 2 percent, the federal funds rate is 4 percent, and real GDP is 5 percent above potential GDP. According to the Taylor rule, in what direction and by how much should the Fed...

Suppose that inflation is 2 percent, the federal funds rate is 4 percent, and real GDP is 5 percent above potential GDP. According to the Taylor rule, in what direction and by how much should the Fed change the real federal funds rate?

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Extracted text: Suppose that inflation is 2 percent, the federal funds rate is 4 percent, and real GDP is 5 percent above potential GDP. According to the Taylor rule, in what direction and by how much should the Fed change the real federal funds rate? Instructions: Round your answer to 2 decimal places. The Fed should increase the federal funds rate by percent.