Respond with active policy response to stabilize inflation

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Reference no: EM13817122

The economy is hit with a positive SRAS shock and you, in your role as a central banker, respond with an active policy response to stabilize inflation. (a) Draw an AS/AD diagram illustrating the changes in output and inflation. (b) Describe briefly how you drew you AS/AD diagram with particular attention to your chosen monetary-policy action. (c) Was your chosen monetary-policy action appropriate for the Federal Reserve given their dual mandate and why?

Reference no: EM13817122

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