What does one do if your email account is hacked and an email is sent in your name asking for money

What does one do if your email account is hacked?  Someone apparently has my email address and my contact list.  They sent an urgent email to the address list saying I was stranded in Italy and to send money.  Do I send am email to everyone in my address book telling them this is a hoax?

Hi, first change the passwords on your accounts, next I guess I would send a short note to your list.

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