The medium$-$run equilibrium is characterized by four conditions:$1.$ Output is equal to potential output Y $=$ Y$,$ and the real policy rate r$,$ must be chosen by the central bank so:$2.$ The unemployment rate is equal to the natural rate u $=$ un$3.$ The real policy interest rate is equal to the natural rate of interest r$,$ where r$,$ is defined as the policy rate where Yn $=$ C$($Yn$-$T$)+1($Ynn$+$x$)+$ G$\mathrm{.}4.$ The expected and actual rate of inflation n$\backslash$deg is equal to the anchored or target rate of inflation, it$.$ This implies the nominal policy rate i $=1,+$ T$.$The IS relation is Y $=$ C$($Y $-$ T$)+($Y$,$ r $+$ x$)+$ G$.$ Suppose r$,$ is $4\%.$If x increases from $4$ to $7\%,$ how must the central bank change r$,$ to maintain the existing medium$-$run equilibrium? A$.$ The central bank needs to increase the real policy interest rate by $3\%$ in order to keep r $+$ x unchanged. B$.$ The central bank should adjust the real policy rate until it also equals $7\%.$ C$.$ The central bank should adjust the real policy rate until it equals $4\%.$ D$.$ The central bank needs to decrease the real policy interest rate by $3\%$ in order to keep r $+$ x unchanged.Suppose G increases.In what direction must the central bank change the real policy interest rate to maintain the existing medium$-$run equilibrium? A$.$ An increase in G shifts the IS curve to the left, causing a decrease in output below Y$,.$ To return to Yn$,$ the central bank must increase the real policy rate, ce B$.$ An increase in G shifts the IS curve to the left, causing a decrease in output below Yn$.$ To return to Y$,,$ the central bank must decrease the real policy rate, c C$.$ An increase in G shifts the IS curve to the right, causing an increase in output above Y$,.$ To return to Yn$,$ the central bank must decrease the real policy rate, D$.$ An increase in G shifts the IS curve to the right, causing an increase in output above Yn$.$ To return to Y$,,,$ the central bank must increase the real policy rate, Suppose T decreases.In what direction must the central bank change the real policy interest rate to maintain the existing medium$-$run equilibrium? A$.$ A decrease in T shifts the IS curve to the left, causing a decrease in output below Y$,.$ To return to Y$,,$ the central bank must increase the real policy rate, cau: B$.$ A decrease in T shifts the IS curve to the right, causing an increase in output above Y$,.$ To return to Yn$,$ the central bank must decrease the real policy rate, c C$.$ A decrease in T shifts the IS curve to the right, causing an increase in output above Yn$.$ To return to Ya$,$ the central bank must increase the real policy rate, ca