2 Suppose that the Fed were committed to following the Taylor rule, given in Box 14.2, p. 554. For each of the following types of shocks, determine whether the use of the Taylor rule would tend to be stabilizing or destabilizing, or would have an ambiguous effect, rela tive to a policy of leaving the money supply unchanged. Consider the behavior of both output and inflation.

a. An increase in money demand.

b. A temporary increase in government purchases.

c. An adverse supply shock.

d. A decline in consumer confidence.

e. An increase in export demand.