Explain the Taylor Rule.  Provide an example (not from class or the book) of how the rule might be used to implement monetary policy.  What are the arguments for and against using such a rule to guide monetary policy?  Consider the following scenarios. How would the Taylor Rule be employed in each?  First, suppose the Fed was run by “inflation nutters” (this term is explained in “What Should Central Banks Do?”)  How would the Taylor Rule be implemented?  Second, in the not too distant past, the Fed (along with most central banks) did not pay a lot of attention to inflation, focusing instead on economic growth.  How would the Taylor Rule be implemented?  Finally, consider the current economic situation. Explain why or why not the Fed should consider using the Taylor rule in the current enviroment.

For each of the following, please explain each step and show it in the graph! c) Assume an economy is at full employment, but then supply falls in the short run. What will happen in the long run if the policymakers do nothing and what will happen in the long run if the policy makers influence aggregate demand with monetary policy to drive back to the natural output?

Read the following premise carefully and answer the questions specifically and in detail. You must answer the request with the correct information, showing that you understand and can properly apply macroeconomic concepts. Try to address all elements of each question and always express the answers in your own words. Faced with an instability of economic growth caused by a recession or accelerated inflation, the Fed uses the open market operation to increase or decrease the available reserves of commercial banks which, in turn, will affect the amount of money available in the economy . In addition to the open market operation, the Fed has other tools available to promote growth, sustainability, and economic stability in a country. These tools have been used historically; A suitable example was the 2008 mortgage debt crisis. 1. Explain in detail monetary policy, its role and its effects on short and long-term economic fluctuations. Use the aggregate demand and supply model presented in…

How might each of the following factors complicate the implementation of monetary policy: long and variable lags, excess reserves and movements in velocity ?