An increase in the interest rate causes the aggregate _____ curve to shift _____.
A) demand; rightward
B) demand; leftward
C) supply; rightward
D) supply; leftward

Question

Quizplus · Accepted Answer

An increase in the interest rate makes borrowing more expensive for businesses and consumers, which tends to reduce spending and investment. This decrease in spending and investment causes the aggregate demand curve to shift leftward.

An Increase in the Interest Rate Causes the Aggregate _____