Exhibit 8-3 -Refer to Exhibit 8-3.A shift in aggregate demand from AD₁ to AD₂ would have been the result of A) a decrease in the price level. B) an increase in the price level. C) a decrease in interest rates (which was not prompted by a change in the price level). D) an increase in interest rates (which was not prompted by a change in the price level).

Question

Quizplus · Accepted Answer

A decrease in interest rates makes borrowing cheaper, encouraging spending and investment, which shifts aggregate demand to the right from AD1 to AD2.

Exhibit 8-3 -Refer to Exhibit 8-3.A Shift in Aggregate Demand from AD1

Exhibit 8-3 -Refer to Exhibit 8-3.A Shift in Aggregate Demand from AD₁