AP Macroeconomics | 6.4 Free Response Assignment (12 points) Directions: Answer the questions based on the following information: An economy is operating in an inflationary environment. 1. Show this economy using a correctly labeled aggregate demand and aggregate supply graph. Be sure to include the following: (4 points) a. Long Run Aggregate Supply b. Current Output c. Current Price Level 2. The central bank of this economy is looking for advice on how to reduce inflation. Name THREE policy options they should consider. (3 points) 3. The central bank has decided to use open market operations to fight inflation. On a money market graph show the impact of this policy choice. (2 points) 4. Using your graph from number 1, show how the central bank's decision will impact the economy. (1 point) 5. Assume the central bank took no action to fight inflation. Describe how the following would have self-corrected. (2 points) United States) x Accessibility: Investigate