In the IS-MP analysis in the Fed model, a rise in investment will shift the:
A)IS curve to the left.
B)IS curve to the right.
C)MP curve up.
D)MP curve down.

Question

Quizplus · Accepted Answer

An increase in investment would shift the IS curve to the right as we move along the MP curve. This is because higher investment would increase aggregate demand and output level at every interest rate. The MP curve would not be affected by the change in investment as it only captures the relationship between interest rates and inflation.

In the IS-MP Analysis in the Fed Model, a Rise