Use the following to answer questions: Figure: AD-AS -(Figure: AD-AS) Refer to Figure: AD-AS. Assume that the economy is in long-run equilibrium. If the Federal Reserve lowers the key interest rate: A) the aggregate demand curve will shift to AD₂. B) the aggregate demand curve will stay unchanged at AD₁. C) there will be a downward movement along the aggregate demand curve AD₁. D) the aggregate demand curve will shift to AD₃.

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Lowering the key interest rate typically increases investment and consumption, shifting the aggregate demand curve to the right, from AD1 to AD2.

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