The _____ effect is a reason for the negative slope of the aggregate demand curve.
A) income
B) substitution
C) interest rate
D) multiplier

Question

Quizplus · Accepted Answer

The interest rate effect is a reason for the negative slope of the aggregate demand curve. As the interest rate rises, the cost of borrowing increases, leading to a decrease in consumer and business spending. This results in a contraction of the economy and a decrease in the demand for goods and services, leading to a downward slope of the aggregate demand curve.

The _____ Effect Is a Reason for the Negative Slope