1. We are all aware of the tightening monetary policy that has occurred in the U.S. during 2022. If the Federal Reserve tightening the then current monetary policy in the face of adverse circumstances, what happened to the MP curve? Include a graph and a written explanation. Include the equation for the MP curve in your answer.

2. Trace the changes in the MP curve from #1 to changes, if any, in the IS.

3. Trace the changes in the MP curve and IS curve to the AD curve. Do this using three diagrams to show the changes to the AD curve.

4. During 2007, the U.S. economy was hit by a price shock when the price of oil increased from around $60 per barrel to around $4130 per barrel by June 2008. While inflation increased during the fall of 2007 (from around 2.5% to 4.0%) unemployment did not change significantly (it even increased slightly). Explain the relationship between inflation and unemployment in 2007 using the modern Phillips curve. Include a graph and an equation.

- Effective Federal Funds Rate - Effective Federal Funds Rate