Use the DAS-DAD diagrams to graphically illustrate the impact of
a permanent increase in the central bank's inflation target when
the economy was initially at a long-run equilibrium. Make sure to
draw the curves associated with the initial SR equilibrium and LR
equilibrium, the transition from the SR to the LR, and the final LR
equilibrium. Clearly label all the curves, axes, equilibrium
points, and values of inflation and output. Explain in words the
time path of output and inflation.
Use the DAS-DAD diagrams to graphically illustrate the impact of a permanent increase in the central bank's inflation ta
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