A decrease in interest rates caused by a change in the price level would cause a(n):
A)decrease in aggregate demand.
B)increase in aggregate demand.
C)decrease in the quantity of real domestic output demanded.
D)increase in the quantity of real domestic output demanded.

Question

Quizplus · Accepted Answer

When interest rates decrease, borrowing becomes cheaper and the incentive to invest increases. This results in an increase in the quantity of real domestic output demanded, which is represented by a rightward shift in the aggregate demand curve.

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