Question: Explain why a shift in monetary policy like that shown in Figure 11.3 can be interpreted as a decline in the Feds long-run target for

Explain why a shift in monetary policy like that shown in Figure 11.3 can be interpreted as a decline in the Fed’s long-run “target” for the inflation rate. (Hint: In the long run, the real interest rate set by the Fed must be consistent with the real interest rate determined in the market for saving and investment.)

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