For each of the scenarios described in problem 1.12, if the AD curve shifted, explain whether the shift will be temporary or permanent.
In problem 1.12 for each of the following scenarios, state the short run effect on the AD curve.
a. There is an increase in government purchases.
b. Costs of production increase.
c. Investors become more pessimistic.
d. The central bank becomes less tolerant of deviations from the target inflation rate.
e. The price level increases.
f. The target inflation rate increases.