In the IS-MP analysis in the Fed model, the intersection of the IS and MP curves determines the:
A)equilibrium exchange rate.
B)output gap.
C)unemployment rate.
D)potential GDP.

Question

Quizplus · Accepted Answer

The intersection of the IS (Investment-Savings) and MP (Monetary Policy) curves in the IS-MP model determines the equilibrium level of output and the interest rate in the economy, which can be related to the output gap, i.e., the difference between actual output and potential output.

In the IS-MP Analysis in the Fed Model, the Intersection