The Fed model links the IS, MP, and Phillips curves. In the IS-MP analysis, an increase in exports 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

An increase in exports will increase aggregate demand, and thus shift the IS curve to the right. This is because exports are a component of aggregate demand, along with consumption, investment, and government spending. The MP curve, on the other hand, is determined by the central bank's monetary policy decisions and is not directly affected by changes in the real economy such as exports.

The Fed Model Links the IS, MP, and Phillips Curves