Suppose the demand for money were to climb with no accommodation by the Fed. The aggregate demand curve shifts to the left to reflect this change because

Question

Quizplus · Accepted Answer

When the demand for money increases without any action from the Federal Reserve to accommodate this increase, the supply of money remains constant while the demand rises. This scenario leads to higher interest rates because people are willing to pay more to borrow money. Higher interest rates, in turn, make borrowing more expensive for both consumers and businesses. This discourages investment and consumption, leading to a decrease in aggregate demand. Therefore, the aggregate demand curve shifts to the left as a result of the increase in interest rates, which causes investment and consumption to fall.

Suppose the Demand for Money Were to Climb with No