In the New Keynesian model, suppose that supply is initially equal to demand in the goods market and there is a negative shock on the demand for investment goods because firms anticipate lower total factor productivity in the future.

(a) Determine the effects on real output, real interest rate, price level, employment, and real wage if the government takes action in response to the shock.

(b) Determine the effects if the central bank lowers the interest rate with the interest rate target still in place.

(c) Determine the effects if government spending decreases to stabilize the economy, with the goal of the fiscal authority being economic efficiency.

(d) Explain and comment on the differences in your results among parts (a), (b), and (c).