The quantity of aggregate goods and service demanded rises when the
A)price level rises, because the interest rate rises.
B)price level rises, because the interest rate falls.
C)price level falls, because the interest rate rises.
D)price level falls, because the interest rate falls.

Question

Quizplus · Accepted Answer

The quantity of aggregate goods and service demanded rises when the price level falls, because the interest rate falls. This is because lower interest rates make it cheaper to borrow money, leading to increased consumer and investment spending. As a result, aggregate demand increases, leading to a higher quantity of goods and services demanded.

The Quantity of Aggregate Goods and Service Demanded Rises When