Read the article "The Taylor Rule: A Benchmark for Monetary Policy" by Ben Bernanke.
a. The original Taylor rule gives equal weights to the output gap and the inflation gap. What weights does the FOMC likely give to these two variables according to Bernanke?
b. Bernanke lists several reasons for why he believes the Federal Reserve should not automatically use the Taylor rule. List the two reasons which you believe to be the most important, and briefly explain why.
Go to federalreserve.gov/monetarypolicy/fomc to find information about the FOMC, including the statements that the FOMC issues after each meeting.
a. What was the federal funds target at its most recent meeting?
b. What was the federal funds target at the beginning of 2022?
Concerns nonconventional policy tools.
a. Which nonconventional policy tool attempts to lower long-term interest rates by affecting expectations of short-term interest rates?
b. Which nonconventional monetary policy tool causes large changes in the monetary base?
