Suppose the Fed is considering three different policy rules,as shown in the following table. 
(A)What is the difference between Rule 1 and Rules 2 and 3?
(B)What is the difference in the target inflation rate between Rules 2 and 3?
(C)Suppose the Fed is currently following Rule 2 and shifts to Rule 3.Which way will the AD curve shift? Why would the Fed make such a change in policy?
Definitions:
Ordinary General Annuity
An annuity where payments are made at the end of each period, such as monthly or annually, in contrast to at the beginning.
Future Value
The predicted amount of money that an investment will grow to at a specific date in the future, considering a certain rate of interest or growth.
Accurate To The Cent
A high level of precision in financial calculations, indicating that amounts are exact to the smallest denomination of currency.
Ordinary General Annuity
A chain of consistent payment transactions transpiring at the end of regular intervals within a set duration.
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