Describe the ubiquitous use of the assumption that credit markets are perfect in economics in general and in macroeconomics.

(a) Describe the ubiquitous use of the assumption that credit markets are perfect in economics in general and in macroeconomics. Explain why this clearly counterfactual assumption has been employed. (b) It might be argued that explicit incorporation of credit market imperfections in macroeconomic models, have been instrumental in resolving anomalies in the literature on the transmission of monetary policy and the propagation of macroeconomic shocks. Identify and describe these anomalies. (c) For each anomaly you identify, explain the theoretical basis for the view that acknowledging credit market imperfections will resolve the anomaly in question and evaluate the extent to which these theoretical assertions are supported by empirical evidence. (d) Explain how imperfections in credit markets interact with asset price volatilty in the determination of macroeconomic outcomes and explain what this implies for the efficacy of inflation targeting. Your paper should include a description of inflation targeting that briefly summarizes the pros and cons of this approach to monetary policy and should explore the compatibility of possible monetary policy responses to asset price volatility within the inflation-targeting framework.