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Consider the Dynamic AS/AD model from class. The economy is initially at its long-run equilibrium. The Federal Reserve Board is considerining changing its target inflation rate. However, they are concerned about the immediate effect on inflation. Find the sensitivity of equilibrium inflation to a change in the Fed's target inflation rate in the same time period.

A. 1+ (φ/ αθπ)
B. αθπ/(1+αθY)
C. 1 + ((1+αθY)/ αθπ)
D. αθπφ /(αθπ φ+1+αθY)

Microeconomics, Economics

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