Suppose the central bank decides to switch from policy rule A to policy rule B as shown in the table below. Use the analysis presented in the text to explain what will happen to the AD curve. $$\begin{array} { | c | c | c | }
\hline \text { Inflation } & \begin{array} { c }
\text { Interest Rate } \
\text { Policy Rule A }
\end{array} & \begin{array} { c }
\text { Interest Rate } \
\text { Policy Rule B }
\end{array} \
\hline 0 & 0.5 & 2.5 \
\hline 2 & 4 & 6 \
\hline 4 & 7.5 & 9.5 \
\hline 6 & 11 & 13 \
\hline 8 & 14.5 & 16.5 \
\hline
\end{array}$$

Question

Suppose the central bank decides to switch from policy rule A to policy rule B as shown in the table below. Use the analysis presented in the text to explain what will happen to the AD curve. $$\begin{array} { | c | c | c | } 
\hline \text { Inflation } & \begin{array} { c } 
\text { Interest Rate } \
\text { Policy Rule A }
\end{array} & \begin{array} { c } 
\text { Interest Rate } \
\text { Policy Rule B }
\end{array} \
\hline 0 & 0.5 & 2.5 \
\hline 2 & 4 & 6 \
\hline 4 & 7.5 & 9.5 \
\hline 6 & 11 & 13 \
\hline 8 & 14.5 & 16.5 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The Answer of Suppose the central bank decides to switch from policy rule A to policy rule B as shown in the table below. Use the analysis presented in the text to explain what will happen to the AD curve. $$\begin{array} { | c | c | c | } 
\hline \text { Inflation } & \begin{array} { c } 
\text { Interest Rate } \
\text { Policy Rule A }
\end{array} & \begin{array} { c } 
\text { Interest Rate } \
\text { Policy Rule B }
\end{array} \
\hline 0 & 0.5 & 2.5 \
\hline 2 & 4 & 6 \
\hline 4 & 7.5 & 9.5 \
\hline 6 & 11 & 13 \
\hline 8 & 14.5 & 16.5 \
\hline
\end{array}$$

Suppose the Central Bank Decides to Switch from Policy Rule