In the IS-MP analysis in the Fed model, if the Federal Reserve raises the federal funds rate, the:
A)IS curve shifts to the left.
B)IS curve shifts to the right.
C)MP curve shifts up.
D)MP curve shifts down.

Question

Quizplus · Accepted Answer

When the Federal Reserve raises the federal funds rate, it is effectively tightening monetary policy, which is represented in the IS-MP model by an upward shift in the MP (monetary policy) curve. This reflects higher interest rates.

In the IS-MP Analysis in the Fed Model, If the Federal