A decrease in interest rates caused by a change in the price level would cause a(n)
A) decrease (or shift left) in aggregate demand.
B) increase (or shift right) in aggregate demand.
C) decrease in the quantity of real output demanded (or movement up along AD).
D) increase in the quantity of real output demanded (or movement down along AD).

Question

Quizplus · Accepted Answer

A decrease in interest rates would make borrowing cheaper, leading to increased consumption, investment, and net exports. This would result in an increase in the quantity of real output demanded and a movement down along the aggregate demand curve.

A Decrease in Interest Rates Caused by a Change in the Price