The question:

\fAnother experts has proposed the following monetary policy rule. RX - r = M ( IT+ - TT ) + ny+ a, this expert has suggested that monetary policy should increase the real interest rate whenever our put varies from potential. combine this policy curve with the IS curve to get a new AD curve. How does this differ from the AD curve we have been using ? b. consider a positive oil price shocks (inflation shock ), use the AS/ AD Frame work to compare and contrast the effect of this shock On the economy in the standard AD and the new AD From part a, use an ASSAD diagram to show your