The U.S. aggregate demand curve shifts leftward if
A) the exchange rate falls.
B) there is a tax cut.
C) the economic conditions in Europe improve so that European incomes increase.
D) the Federal Reserve hikes the interest rate.

Question

Quizplus · Accepted Answer

If the Federal Reserve hikes the interest rate, it makes borrowing more expensive and reduces the amount of money consumers and businesses have to spend, hence shifting the aggregate demand curve leftward. The other choices would shift the aggregate demand curve rightward.

The U.S. Aggregate Demand Curve Shifts Leftward If