Questiоn 8 Suppоse the Bаnk оf Mexico (which is Mexico’s centrаl bаnk) increases the real interest rate in Mexico above its long-run level for three periods. Before this, Mexico’s real interest rate was at its long-run level. Explain why/how this would influence the U.S. economy through exchange rates. Assume that, before the Bank of Mexico made this change, the U.S. economy was in steady state, with output at potential and inflation at the central bank’s target. Depict what happens in the U.S. using the AS-AD diagram, assuming adaptive expectations. Describe what happens to inflation and output in your graph.In addition to the curves asked for by the instructions on the cover page, please include the curves “”, “”, “”, and “”, which are the aggregate supply and demand curves in the second and third periods during which the Bank of Mexico has increased the real interest rate in Mexico.Your graph should include a label with 0 on the horizontal axis and
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