Answer:
The neutral interest rate is the rate at which real interest rates equal nominal interest rates.
What is Neutral Interest Rate?
The neutral interest rate is the rate at which monetary policy is neither stimulating nor restricting economic growth.
The theoretical federal funds rate at which the Federal Reserve's monetary policy is neither accommodating nor restrictive is known as the neutral rate. The economy's ability to maintain full employment and the resulting price stability is consistent with the short-term real interest rate.
This rate fluctuates. It is a dynamic rate that changes according to a number of economic and financial market variables. To model and estimate this rate, numerous economists both inside and outside the Federal Reserve System put in a lot of effort.
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