A reduction in the interest rate causes consumption and investment to _____, which shifts the aggregate demand curve _____.
A) rise; rightward
B) rise; leftward
C) fall; rightward
D) fall; leftward

Question

Quizplus · Accepted Answer

A reduction in the interest rate lowers the cost of borrowing for individuals and businesses, making it cheaper to consume and invest. This leads to an increase in aggregate demand, or the total demand for goods and services in the economy, and shifts the aggregate demand curve rightward.

A Reduction in the Interest Rate Causes Consumption and Investment