In an AS/AD figure, lowering the federal funds rate initially shifts the
A) long-run AS curve rightward.
B) AD curve rightward.
C) long-run AS curve leftward.
D) AD curve leftward.

Question

Quizplus · Accepted Answer

Lowering the federal funds rate would decrease the cost of borrowing and increase investment, consumption, and net exports, resulting in an initial rightward shift of the AD curve.

In an AS/AD Figure, Lowering the Federal Funds Rate Initially