Everything else held constant,an autonomous tightening of monetary policy will cause
A)the quantity of aggregate demand to increase.
B)the quantity of aggregate demand to decrease.
C)aggregate demand to increase.
D)aggregate demand to decrease.

Question

Quizplus · Accepted Answer

An autonomous tightening of monetary policy, such as an increase in interest rates, will increase the cost of borrowing and reduce consumer and firm spending. This decrease in spending will lead to a decrease in aggregate demand. Therefore, the correct answer is D - aggregate demand will decrease.

Everything Else Held Constant,an Autonomous Tightening of Monetary Policy Will