Economic

Questions: draw the graph to illustrate the ideas under?

1. if the central bank wants to increase inflation from 2% to 4%, it will shift the MP curve to the left. This can be done by lowering the interest rate.

2. if the monetary policy curve shifts to the right, then a given increase in the federal funds rate would result in a greater decrease in economic activity. This could happen if the central bank tightens monetary policy in order to slow down inflation.

3. if the monetary policy curve shifts to the left, then a given increase in the federal funds rate would result in a smaller decrease in economic activity. This could happen if the central bank eases monetary policy in order to stimulate economic growth.

4. if the monetary policy curve shifts up, then a given increase in the federal funds rate would result in a greater increase in interest rates. This could happen if the central bank tightens monetary policy in order to slow down inflation.

5. if the monetary policy curve shifts down, then a given increase in the federal funds rate would result in a smaller increase in interest rates. This could happen if the central bank eases monetary policy in order to stimulate economic growth.