Suppose the economy is currently suffering from a very high rate of inflation caused by aggregate demand that has increased beyond potential GDP. You will create two side-by-side graphs.

a. In a correctly labeled graph, show equilibrium in the money market.
b. In a correctly labeled graph, show the current short-run equilibrium in the macroeconomy.
c. What type of policy should the Fed engage in?
d. In your graph in (a), show the impact of the policy you chose in (c) on the money market and the equilibrium interest rate.
e. In your graph in (b), show the impact of the policy you chose in (c) on the macroeconomy. Indicate what happened to real GDP and price level.