The article explores shocks and frictions in the US business cycle using a Bayesian DSGE approach. By incorporating a new monetary policy rule that targets full employment, the model fits US economic data well. When the unemployment rate is used in the policy rule instead of the output gap, wage mark up shock plays a bigger role in inflation and interest rates. Productivity shock also has a stronger impact on output. Surprisingly, hours worked decrease in response to a risk premium shock, and inflation decreases in response to demand shocks.