Problem
In the New Keynesian model, how should the central bank change its target interest rate in response to each of the following shocks. Use diagrams and explain your results.
(a) There is a shift in money demand.
(b) Total factor productivity is expected to decrease in the future.
(c) Total factor productivity decreases in the present.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.