Use the Taylor rule, targetif f = + if f +1/2( ) + 1/2(y y), describe or solve for whathappens to the interest rate whena. the Fed increases its...

Use the Taylor rule, targetif f = π + i∗f f +1/2(π − π∗) + 1/2(y − y∗), describe or solve for whathappens to the interest rate whena.

a. the Fed increases its inflation rate target by 1 percentb.

b. the economy goes into a recession