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

Question

Quizplus · Accepted Answer

An increase in the Federal Reserve interest rate typically leads to higher borrowing costs, which can reduce consumer spending and business investment, thus shifting the aggregate demand curve leftward.

The U.S. Aggregate Demand Curve Shifts Leftward If