Identifying if an economy is in medium run equilibrium and the necessary central bank action to return the economy to medium run equilibrium Here are values for a hypothetical economy

\(Y_{n}=1000 ; u_{n}=5 \% ; r_{n}=2 \% ; x=1 \% ; \pi^{e}=2 \%\) and a table describing this economy in various situations:

a. Explain why Situation \(\mathrm{A}\) is a medium run equilibrium and Situation B, C, D and E are not a medium run equilibrium.

b. What is the action to be taken by the central bank to move from Situation B to medium run equilibrium?

c. What is the action to be taken by the central bank to move from Situation \(C\) to medium run equilibrium?

d. What is the action to be taken by the central bank to move from Situation \(D\) to medium run equilibrium?

e. What is the action to be taken by the central bank to move from Situation \(\mathrm{E}\) to medium run equilibrium?

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Situation A B \i(%) n(%) u x Yn YCGi (%) (%) u (%) x (%) 1000 1000 700 150 150 4 1000 1050 730 170 150 1000 950 670 130 150 2 5 1 2 3 3 1 4 1 8 3 D 1000 950 670 150 130 4 1 8 1 E 1000 1050 730 150 170 4 3 3 1