When the real interest rate rises,
A)AD shifts left..
B)the long-run aggregate supply curve shifts to the right.
C)the multiplier stays the same.
D)AD shifts right.

Question

Quizplus · Accepted Answer

When real interest rates rise, it becomes more expensive for individuals and companies to borrow and spend money. This leads to a decrease in aggregate demand (AD) as consumers and firms reduce their spending. Therefore, the AD curve shifts left.

When the Real Interest Rate Rises