-In the above figure, suppose point C is the original equilibrium. If the Fed increases the federal funds rate, the new equilibrium is given by point
A) A.
B) B.
C) C (that is, the equilibrium does not change).
D) D.

Question

-In the above figure, suppose point C is the original equilibrium. If the Fed increases the federal funds rate, the new equilibrium is given by point
A) A. 
B) B. 
C) C (that is, the equilibrium does not change). 
D) D.

Quizplus · Accepted Answer

Increasing the federal funds rate typically leads to higher interest rates, reducing investment and consumer spending, which shifts the aggregate demand curve leftward, moving the equilibrium to point A.

-In the Above Figure, Suppose Point C Is the Original