Question textFill in the blanks or select the correct option from the drop-down choices. Total marks: 10Note: Each answer carries equal marks.Answer the following questions related to the monetary policy. a) What is the formula for the RBA’s policy rule of thumb for target nominal interest rate? Multiple choice 1 Question 13Overnight nominal rate = Inflation rate + Neutral real interest rate + ½ x (Inflation – 2.5%) - Output gapOvernight nominal rate = Inflation rate + Neutral real interest rate + ½ x (Inflation – 2.5%) + Output gapOvernight nominal rate = Inflation rate + Neutral real interest rate + ½ x (Inflation – 4%) + Output gapOvernight nominla rate = Inflation rate + Neutral real interest rate + ½ x (Inflation – 4%) - Output gapMark 1.00 out of 1.00The correct answer is: Overnight nominal rate = Inflation rate + Neutral real interest rate + ½ x (Inflation – 2.5%) + Output gapb) Use the RBA rule-of-thumb to predict how the RBA would want to change its cash rate target for An increase in consumer and business confidence pushes the economy to producing output at 1% above potential output while inflation rises to 4%. Assume the estimated neutral real interest rate is 2% and target inflation rate is 2.5%. The RBA will decrease the cash rate target (nominal interest rate) is = Answer 1 Question 13[input] per cent + Answer 2 Question 13[input] per cent + 0.5 * (Answer 3 Question 13[input] per cent - Answer 4 Question 13[input] per cent) + Answer 5 Question 13[input] per cent= Answer 6 Question 13[input] per centc) The target real interest rate is= Answer 7 Question 13[input] per cent -  Answer 8 Question 13[input] per cent= Answer 9 Question 13[input] per centMultiple fill-in-the-blank