What monetary policy action would you take in the given case, Macroeconomics

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What monetary policy action would you take in the given case

Problem

A consumption boom: Using the IS-MP diagram, explain what happens to the economy if there is a temporary consumption boom that lasts for one period.

(a) Initially, suppose the central bank keeps the nominal interest rate unchanged.

(b) Suppose you are appointed to chair the Federal Reserve. What monetary policy action would you take in this case and why? Refer to the IS-MP diagram.

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.

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