An economy is experiencing a contractionary gap and an inflation rate below the central bank's target rate. a) In response, the central bank decides to increase its target inflation rate. On an aggregate demand - aggregate supply (AD/AS) diagram show the short run AND long-run impact of this policy change on the economy. Label your diagram carefully and explain in words what it shows. (8 marks) b) Imagine, instead, that the central bank responds by implementing a policy of quantitative easing. Explain carefully in words and using diagrams how this policy can increase economic activity. In your answer, be sure to discuss in detail the impact of quantitative easing on the balance sheets of financial institutions.