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

Question

Quizplus · Accepted Answer

In the IS-MP model, the IS curve represents the relationship between the interest rate and the level of income that brings the goods market into equilibrium. A decrease in imports increases net exports, which in turn increases aggregate demand. This leads to a rightward shift of the IS curve, as higher aggregate demand at any given interest rate increases the equilibrium level of income.

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