In the short-run, if the Federal Reserve increases interest rates, then consumption and investment ________, planned aggregate expenditure ________, and short-run equilibrium output ________.
A)increase; increases; increases
B)increase; increases; decreases
C)increase; decreases; decreases
D)decrease; decreases; decreases

Question

Quizplus · Accepted Answer

In the short run, increased interest rates drive down consumption, investment, and planned aggregate expenditures. This, in turn, reduces short-run equilibrium output.

In the Short-Run, If the Federal Reserve Increases Interest Rates