A) decrease aggregate demand by increasing the interest rate from 2 to 4 percent.
B) decrease aggregate demand by increasing the interest rate from 4 to 6 percent.
C) increase aggregate demand by decreasing the interest rate from 4 to 2 percent.
D) increase the level of investment spending from $120 billion to $150 billion.

Question

A) decrease aggregate demand by increasing the interest rate from 2 to 4 percent. 
B) decrease aggregate demand by increasing the interest rate from 4 to 6 percent. 
C) increase aggregate demand by decreasing the interest rate from 4 to 2 percent. 
D) increase the level of investment spending from $120 billion to $150 billion.

Quizplus · Accepted Answer

Increasing the interest rate from 4 to 6 percent will decrease aggregate demand, as higher interest rates discourage borrowing and investment, leading to lower levels of consumption and investment spending. The other options do not directly address aggregate demand or investment spending.

A) Decrease Aggregate Demand by Increasing the Interest Rate from 2