In the short run,which of the following would most likely result from an increase in interest rates?
A) a reduction in both equilibrium output and the price level
B) an increase in the equilibrium price level and a reduction in equilibrium output
C) a reduction in the equilibrium price level and an increase in equilibrium output
D) an increase in both equilibrium GDP and the price level
E) an increase in the equilibrium price level and no change in output

Question

Quizplus · Accepted Answer

An increase in interest rates typically reduces investment and consumer spending, leading to a decrease in aggregate demand. This results in a reduction in both equilibrium output and the price level in the short run.

In the Short Run,which of the Following Would Most Likely