Problem
Use the IS LM-FF model to explain why the Federal Reserve is likely to raise interest rates (by reducing the money supply) at least two more times during 2017. Why are they doing this?
a. According to the Keynesian model, what are the expected economic effects of these interest rate increases on the domestic economy (output, employment, real interest rates, and the price level)? Explain fully and illustrate with the appropriate graphs.
b. What would happen if the Federal Reserve did nothing, instead?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.