1. World interest rates, including the ECB's and the Federal Reserve's main monetary policy interest rate targets, are approximately zero.Zero interest rates make monetary policy dilemmas.Explain what this dilemma is and how it affects monetary policy as defined by the Taylor Rule.
2. Given the supply and demand shocks caused by the pandemic, expansionary monetary policy is called for.What can central banks do given the zero-interest rate lower bound (alternatives to standard policy actions) and are their actions effective? Explain why or why not.
3. Central Bank monetary policy effectiveness is threatened by the rise of inside money.Provide two examples of inside money and explain why it reduces monetary policy effectiveness.