3. For this question suppose you are the Fed Chair. With the goal of stabilizing output, explain how and why you would change the interest rate in response to the following shocks. Show the effects on the economy in the short-run using the IS-MP diagram. Assume that in all cases, Y starts off at zero before the news arrives. a. Consumers become more pessimistic about the state of the economy and future productivity growth. b. Improvements in information technology increase productivity and therefore increase the marginal product of capital (MPK). c. A booming economy in Europe this year leads to an unexpected increase in the demand by European consumers for U.S. goods. d. A large earthquake destroys buildings and infrastructure on the West Coast. e. A housing bubble bursts, so that housing prices fall 20% and new home sales drop sharply. 3