The interest-rate effect
A)depends on the idea that decreases in interest rates increase the quantity of goods and services demanded.
B)depends on the idea that decreases in interest rates decrease the quantity of goods and services demanded.
C)is responsible for the downward slope of the money-demand curve.
D)is the least important reason,in the case of the United States,for the downward slope of the aggregate-demand curve.

Question

Quizplus · Accepted Answer

The interest-rate effect suggests that lower interest rates reduce the cost of borrowing, which increases investment and consumption, thereby increasing the quantity of goods and services demanded.

The Interest-Rate Effect