Suppose that the nominal federal funds rate should be 5.00% based on a calculation that uses
the Taylor rule presented in the Mishkin textbook. What is the actual inflation rate used in the
calculation, if he equilibrium real federal funds rate is 1.00%, the output gap is minus 0.50%,
and the target inflation rate is 2.0%?
a) 2.50%.
b) 3.50%.
c) 4.50%.
d) 5.00%.
e) None of the above is correct, instead it should be________.