Ask Question
BusinessBusiness
24 November, 08:54

An increase in interest rates affects aggregate demand by

A. Shifting the aggregate demand curve to the right, increasing real GDP and lowering the price level

B. Shifting the aggregate demand curve to the left, reducing real GDP and lowering the price level

C. Shifting the aggregate supply curve to the left, decreasing real GDP and increasing the price level

+3
Answers (1)
  1. 24 November, 12:37
    0
    Option (B) is correct.

    Explanation:

    When there is an increase in the interest rate then as a result this will shift the aggregate demand curve leftwards. This is because of the fall in one of the component of aggregate demand curve that is investment.

    Increased interest rate will reduce the investment demand and hence shifts the aggregate demand curve rightwards. This increase in the interest rate will also increase the reserves of the banks.

    When there is a leftward shift in the AD curve then as a result there is a fall in both real GDP and Price level in an economy.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “An increase in interest rates affects aggregate demand by A. Shifting the aggregate demand curve to the right, increasing real GDP and ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
Proper segregation of functional responsibilities calls for separation of: A. custody, execution, and reporting. B. authorization, recording, and custody. C. authorization, payment, and recording. D. authorization, execution, and payment.
Answers (1)
Under a contractionary taxation policy, the government tries to improve its finances by
Answers (1)
If the nicks were to play against cavs who will win?
Answers (1)
What type of inmate labor system puts inmates to work cleaning public parks and maintaining roads and highways? select one:?
Answers (1)
A company's competitors are other companies that are trying to do what? A. Make a profit B. Analyze demographic trends C. Use their personal skills and abilities D. Take advantage of the same opportunity
Answers (1)
New Questions in Business
Which of the following statements is true of theories in economics? Theories in economics A. are used to construct models from which quantitative predictions can be made. B.
Answers (1)
Reducing (and sometimes eliminating) the size of engineering staffs has become a recent trend among airlines since they are no longer as involved with the design of new aircraft. A. True B. False
Answers (1)
Ashton Bank knows that its customer, Juan, has died. One day after Juan's death, Ashton Bank was presented a check for clearing of $3,000. The check was written by Juan a week prior to his death to Bailey Enterprises.
Answers (1)
Which of the following may be true for a company pursuing a strategy of unrelated diversification rather than a strategy of related diversification? a. The company has to achieve coordination between business units. b.
Answers (1)
Private markets fail to reach a socially optimal equilibrium when positive externalities are present because the A. private cost exceeds the private benefit at the private market solution. B.
Answers (1)
Home » Business » An increase in interest rates affects aggregate demand by A. Shifting the aggregate demand curve to the right, increasing real GDP and lowering the price level B.
Sign Up Forgot Password?