The notion of the "interest rate effect" was one of the basic reasons behind the downward sloping nature of the
A)supply curve.
B)present value curve.
C)aggregate demand curve.
D)aggregate supply curve.

Question

Quizplus · Accepted Answer

The interest rate effect suggests that as the interest rate increases, the cost of borrowing money also increases, leading to a decrease in consumer and business spending. This results in a decrease in the aggregate demand for goods and services, causing a downward sloping aggregate demand curve. Therefore, the correct answer is C, the aggregate demand curve.

The Notion of the "Interest Rate Effect" Was One of the Basic