#2 Assume an economy in the long run, where inflation is at target of 2%. The central bank policy (nominal) interest rate is 4%. Due to a financial crisis the risk premium increases from 1% to 5%. a) What is the real interest rate before and after the change? b) Show in the appropriate graph what happens to the output gap. c) Show in graph what will happen to inflation, put unexpected inflation on the vertical axis. (if it helps, you can assume that inflation expectations equal 2% and do not change). d) How will the central bank respond to the new situation