Answer: 16.5%
Explanation:
The Taylor Rule suggests that the Federal reserve should raise the fed funds rate if inflation rates are above the targeted rates and/ or if GDP is growing at a higher rate than it potentially should.
The rate is calculated as;
Federal funds rate target = (1.5 * Inflation rate) + (0.5 * GDP gap) + 1
= (1.5 * 9%) + (0.5 * 4%) + 1%
= 13.5% + 2% + 1
= 16.5%
