would raising the target federal funds rate be good policy

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Reference no: EM131161814

The federal funds rate is currently held in the 0-025% (zero-bound) range. Suppose the Fed suddenly announces that it will raise the target federal funds rate to 1% over the next 6 weeks. Using the IS-MP diagram, illustrate and explain the short run macroeconomic effects of this announcement. Given these effects and current macroeconomic conditions, would raising the target federal funds rate be a good policy? Explain.

Make sure to appropriately use economic models/graphs to substantiate your analysis and explain your answer.

Reference no: EM131161814

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