Suppose that the economy is thought to be 3 percent below potential when potential output grows 3.5 percent per year.

Suppose that the economy is thought to be 3 percent below potential when potential output grows 3.5 percent per year. Suppose that the Fed is following the Taylor rule (with the equilibrium real federal funds rate assumed to be 2 percent and the weights on the inflation gap and output gap both equal to 1⁄2). The inflation rate was 3 percent over the past year. The federal funds rate is currently 4 percent.  What is the Fed's target for the inflation rate?