Answer as detailed as possible with graphs when necessary.

Q2. Consider an economy that is initially in a long-run equilibrium at point 1 in the graphs below. (Like last question, you can draw the lines/boxes to on the diagram below. To label a point, you can use Insert-Shapes-Oval to get a small dot.) 1) {11.51 LRPC, Suppose that, starting from point 1, the Fed chooses to ease monetary policy given the current crisis. Shift the appropriate curve(s) in the graphs above. Label the new short-run equilibrium as point 2 in all five graphs. Suppose there are no more changes in monetary policy and the economy returns to long-run equilibrium through the self-correcting mechanism. Will the level ofinflation in the new long- run equilibrium be higher, lower, or unchanged from the original level 7:1? (You don_ot need to shift curves or show the new long-run equilibrium on the graphs. .Iust write the answer below.) Answer: Will the real interest rate in the new long-run equilibrium be higher, lower, or unchanged from the original level an