Describe the response of a central bank

Reference no: EM133630069

Question: Using either the IS-PC-MR (single lag) or the IS-LM model, either graphically or using text answer the following:

a. Describe the response of a central bank to a temporary positive inflation shock.

b. Describe the response of a central bank to a permanent positive demand shock (rightward shift of IS)

c. Compare and contrast the two scenarios in terms of what happens to output, inflation, and interest rates over time.

d. How would the response of a central bank that is very hawkish toward inflation differ from one that is dovish on inflation?

Reference no: EM133630069

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