An increase in investment spending caused by a decline in the interest rate will:
A)shift the aggregate supply curve to the left.
B)move the economy up along an existing aggregate demand curve.
C)shift the aggregate demand curve to the left.
D)shift the aggregate demand curve to the right.

Question

Quizplus · Accepted Answer

An increase in investment spending caused by a decline in the interest rate will shift the aggregate demand curve to the right. This is because the lower interest rate makes it cheaper for firms and households to borrow money, which leads to increased spending on investment goods and consumption goods. This, in turn, increases the demand for goods and services, shifting the aggregate demand curve to the right.

An Increase in Investment Spending Caused by a Decline in the Interest