An increase in investment spending can be expected to ________ interest rates and cause ________ the aggregate demand curve.
A) increase; a rightward shift of
B) increase; an upward movement along
C) decrease; a downward movement along
D) decrease; a leftward shift of
E) have no effect on; no change in

Question

Quizplus · Accepted Answer

An increase in investment spending would increase the demand for loans, which would increase the interest rates. This increase in interest rates would cause a rightward shift of the aggregate demand curve, as higher interest rates make it more expensive for firms and households to borrow, reducing their consumption and investment spending.

An Increase in Investment Spending Can Be Expected to ________