PART II: IS/MP Model (20 points) 1. What were the three factors that contributed to the rise in inflation in the USA during the 1970s? (3 points) 2. What were the actions of policymakers to stimulate economy? Illustrate your answer with the IS/MP diagram. (5 points) 3. How did this monetary policy impact the Phillips curve? Why was the policy flawed? (3 points) 4. In 1979, Paul Volcker was appointed to chair the FED and faced the Great Inflation. What actions did Volcker take to reduce the rate of inflation? Explain your answer by using the IS/MP Model and the Phillips curve. (5 points) 5. Show how the dynamics of the economy with Volcker's monetary policy. Illustrate changes over time for the real interest rate, R, short-run output, Yt, and inflation rate, T. (4 points)