Consider the IS-LM-PC model analyzed in the course. Suppose there is an increase significant increase in the price of oil and that this increase leads to an increase in the margin m (the margin between prices and nominal wages) on which depends the PS relation which characterizes the price determination. a) Using the PS relationship that characterizes the determination of prices and the WS relationship that characterizes wage determination, graphically analyze the effect of this change in the natural rate of unemployment and in the equilibrium level of the real wage. Briefly explain. b) Suppose that the economy was initially in medium-term equilibrium before the change in oil price. Graphically analyze the short-term effects of the increase in the price of oil on equilibrium production and inflation. Explain briefly. c) How should the central bank react if it wishes to stabilize the rate inflation?