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3. Suppose that a fall in house prices decreases wealth substantially. (For simplicity, assume that the...

3. Suppose that a fall in house prices decreases wealth substantially. (For simplicity, assume that the economy begins in long-run equilibrium.) a. How will this change affect output in the short run? b. Suppose the Federal Reserve wants to prevent the impact you found in part (a). Should it increase the real interest rate, decrease it, or leave it unchanged (or is it not possible to tell)? c. How, if at all, should the Federal Reserve change the supply of money in order to bring about this change in the real interest rate? Answer with graphs and explanation. These were answered previously but were incorrect so do not post the same answer.

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