The wealth effect and the interest rate effect are changes in the price level that:
A)bring about a movement along the aggregate demand curve.
B)lead to a shift of the demand curve for a particular good.
C)result in a shift of the aggregate supply curve.
D)help explain the vertical shape of the long-run aggregate supply curve.
E)cause a movement along the aggregate supply curve

Question

Quizplus · Accepted Answer

The wealth effect and the interest rate effect both affect how much consumers are willing to spend on goods and services, which changes the quantity demanded at each price level. As a result, they cause movement along the aggregate demand curve.

The Wealth Effect and the Interest Rate Effect Are Changes