Based on the figure below, the economy is initially at point A on the monetary policy reaction function (RF1) and the aggregate demand curve (AD1) . The actual rate of inflation is ' and the Federal Reserve's target inflation rate is *1. 
If the Federal Reserve raises its target inflation rate to *3, then the Federal Reserve's monetary policy reaction function will _____ and the aggregate demand curve will _____.
Definitions:
Fallacy of Composition
The erroneous belief or argument that what is true for a part is necessarily true for the whole group or entity.
Economic Relationships
The interactions between different variables within the economy, such as supply and demand, and price and quantity.
Average Variable Cost
The per-unit variable cost, determined by dividing the total variable costs by the number of units produced.
Marginal Revenue
The increase in profit from selling an extra unit of a good or service.
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