When the Federal Reserve increases the interest rate, the MP curve shifts up and short-term output falls.

Name: When the Federal Reserve increases the interest rate, the MP curve shifts up and short-term output falls.
Brand: Quizplus
Rating: 4.8 (35 reviews)

Question

Quizplus · Accepted Answer

When the Federal Reserve increases the interest rate, the cost of borrowing increases, which reduces spending and investment activity. This leads to a decrease in short-term output, which is reflected by a shift up in the MP curve.

When the Federal Reserve Increases the Interest Rate, the MP