All of the information needed to answer the question is provided on the picture. This is for my Economic Policy and Theory course.

what else is needed?? the 3 equations are given everything is given

1. Consider the basic 3-equation New Keynesian model discussed in class: T = T + K +8, = -(i - I-r) +u, i = r + + + Br(-1"). Assume that the central bank announces an increase in target inflation a' from, say, 14 to 12. a. Illustrate graphically using the IS-MP-PC framework the equilibrium effects of an increase in the inflation target. Make sure that you label all axes, curves, curve shifts, and reference points on your graph correctly and that you identify the initial and terminal equilibrium points. b. Does actual inflation rise by as much as the increase in target inflation? Why or why not? Explain your answer carefully by tracing your argument through the policy transmission mechanism implied by the New Keynesian model. c. Is there a way monetary policy can implement the higher inflation target immediately by choosing an appropriate value for Ba? Illustrate your answer on the IS-MP-PC graph. ht TT 1 0 1. Consider the basic 3-equation New Keynesian model discussed in class: T = T + K +8, = -(i - I-r) +u, i = r + + + Br(-1"). Assume that the central bank announces an increase in target inflation a' from, say, 14 to 12. a. Illustrate graphically using the IS-MP-PC framework the equilibrium effects of an increase in the inflation target. Make sure that you label all axes, curves, curve shifts, and reference points on your graph correctly and that you identify the initial and terminal equilibrium points. b. Does actual inflation rise by as much as the increase in target inflation? Why or why not? Explain your answer carefully by tracing your argument through the policy transmission mechanism implied by the New Keynesian model. c. Is there a way monetary policy can implement the higher inflation target immediately by choosing an appropriate value for Ba? Illustrate your answer on the IS-MP-PC graph. ht TT 1 0