Macroeconomics, monetary policy

8. Monetary policy C. Suppose that the economy was initially at its long-run equilibrium, and inflation rate is at 2%. Then a sudden depreciation of its currency signicantly increased its exports. Draw an AS-AD graph to show the effect of this event, state what will happen to ination rate, unemployment rate and real GDP growth rate during the recession? . Suppose that you were the governor of the central bank and the target for the overnight rate was at 1% prior to the stock market crash. What new target for the overnight loans market would you propose as recession started? Justify your choice. State how central bank may reach the new target for overnight rate using both operational band and open market operation? . What economy wide ripple effects would you expect following above central bank's actions? Explain in detail and in chronological order. Draw appropriate graphs to support your arguments. . What is the main challenge central bank may face in the process of stimulating economy recovery to its long-run equilibrium