Through interest rates, there is a negative relationship between inﬂation and aggregate demand.

Question

Quizplus · Accepted Answer

When interest rates are increased to combat inflation, borrowing becomes more expensive and consumers and businesses may spend less, leading to a decrease in aggregate demand. Conversely, when interest rates are lowered to stimulate demand, inflationary pressures may increase. Therefore, there is a negative relationship between inflation and aggregate demand through interest rates.

Through Interest Rates, There Is a Negative Relationship Between Inﬂation