Use an Aggregate Supply-Aggregate Demand model to illustrate an economy initially operating at an equilibrium point where the aggregate price level is equal to the target level the central bank has chosen for its monetary policy objective.Also assume output is equal to the full-employment level of output.From this initial point, assume the economy is hit by an adverse supply shock.

(a) Shift the appropriate curve(s) to illustrate the effect of this shock and discuss its effects on the aggregate price level and output.Illustrate this portion of your answer by inserting a figure in the space for Question 4.

(b) Assume the central bank, in response to this shock, wished to bring the price level back to its target value.How would it accomplish this objective and what would be the consequences of this action on output?

(c ) Now assume that the central bank, in response to the supply shock, chose to bring output back to the full employment level. How would it accomplish this objective and what would be the consequences of this action on the price level?