The intersection of the IS curve and the MP curve determine:
A)the federal funds rate.
B)the risk-free interest rate in the economy.
C)the largest output gap.
D)macroeconomic equilibrium.

Question

Quizplus · Accepted Answer

The intersection of the IS curve and the MP curve determines macroeconomic equilibrium, where aggregate demand equals aggregate supply in the economy. This point represents the level of output and interest rate that is consistent with full employment and stable inflation in the economy. The other options are not necessarily determined by the intersection of the IS and MP curves.

The Intersection of the IS Curve and the MP Curve