When the Fed raises the federal funds rate, other

Question

Quizplus · Accepted Answer

When the Fed raises the federal funds rate, interest rates in general rise, which makes borrowing more expensive. This leads to a decrease in consumption (people spend less on big-ticket items like houses and cars), investment (businesses invest less due to higher borrowing costs), and ultimately, net exports (higher interest rates make the country's currency relatively more attractive, which makes exports more expensive and reduces demand for them). Therefore, the aggregate demand curve shifts leftward.

When the Fed Raises the Federal Funds Rate, Other