Fed's Janet Yellen: Taylor Rule and Fed Funds Rate

The video discusses the relationship between the Federal Reserve's interest rates and the Taylor rule, highlighting a significant discrepancy between the two. It explains that the current Fed funds rate is lower than what the Taylor rule suggests, due to economic headwinds. The concept of a neutral level of the Fed funds rate, which aligns with full employment, is explored, noting its depression post-financial crisis. The discussion also touches on secular stagnation and the hope for a rise in rates over time.

What is the main reason for the divergence between the Fed funds rate and the Taylor rule as discussed in the video?

• Market headwinds are influencing the rates.

• The Taylor rule is outdated.

• The Fed funds rate is fixed.

• The Fed has adopted a new rule.

According to the video, what does the Taylor rule suggest the Fed funds rate should be?

• 0.25% to 0.50%

• 1.5%

• 3.7%

• 5%

What is the 'neutral level' of the Fed funds rate as mentioned in the video?

• A rate that is consistent with full employment.

• A rate that is always above the Taylor rule.

• A rate that is fixed by the government.

• A rate that is determined by inflation.

What economic condition is associated with the discussions of secular stagnation in the video?

• High inflation

• Low interest rates

• Full employment

• Rapid economic growth

What is the hope expressed in the video regarding the Fed funds rate over time?

• It will be abolished.

• It will rise over time.

• It will decrease significantly.

• It will remain constant.