Problem
Suppose, in the Friedman-Lucas money surprise model, that there are money demand shocks and shocks to total factor productivity. Neither private sector economic agents nor the central bank can observe money demand shocks directly. Private sector economic agents cannot observe productivity shocks. However, the central bank can observe productivity shocks. How should the central bank conduct monetary policy? Discuss.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.