A decrease in aggregate demand is most likely to be caused by:
A)an increase in the wealth of consumers.
B)an increase in consumer confidence.
C)an increase in interest rates for home mortgages.
D)a decrease in tax rates on household income.

Question

Quizplus · Accepted Answer

An increase in interest rates for home mortgages is likely to decrease aggregate demand because it raises the cost of borrowing for households, reducing consumption spending and investment in housing. An increase in wealth, consumer confidence, or a decrease in tax rates would generally increase aggregate demand by increasing consumer spending, business investment, or both.

A Decrease in Aggregate Demand Is Most Likely to Be