Question: Chapter 9 described three alternative policy responses by the Fed to a supply shock: neutral, accommodating, and extinguishing. In terms of how the Fed weighs

Chapter 9 described three alternative policy responses by the Fed to a supply shock: neutral, accommodating, and extinguishing. In terms of how the Fed weighs inflation against output, that is, the parameters a and b of equation (14.1), explain how each of the Fed’s policy responses to a supply shock would fit into a Taylor Rule.

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