-If the Fed raises the federal funds rate, eventually the
A)AD curve shifts leftward and real GDP decreases.
B)AS curve shifts leftward and real GDP decreases.
C)AS curve shifts rightward and real GDP increases.
D)AD curve shifts rightward and real GDP increases.
E)AD curve shifts rightward and real GDP decreases.

Question

-If the Fed raises the federal funds rate, eventually the
A)AD curve shifts leftward and real GDP decreases. 
B)AS curve shifts leftward and real GDP decreases. 
C)AS curve shifts rightward and real GDP increases. 
D)AD curve shifts rightward and real GDP increases. 
E)AD curve shifts rightward and real GDP decreases.

Quizplus · Accepted Answer

Raising the federal funds rate makes borrowing more expensive, reducing consumer spending and investment, which decreases aggregate demand (AD), shifting the AD curve leftward and decreasing real GDP.

-If the Fed Raises the Federal Funds Rate, Eventually the