Changes in interest rates, ceteris paribus, cause a shift in
A) neither the investment demand curve nor the aggregate demand curve.
B) the investment demand curve, but not the aggregate demand curve.
C) the aggregate demand curve, but not the investment demand curve.
D) the investment demand curve and the aggregate demand curve.

Question

Quizplus · Accepted Answer

Changes in interest rates affect the cost of borrowing, which influences the level of investment and consumption, leading to a shift in the aggregate demand curve. However, the investment demand curve itself does not shift; rather, the quantity of investment demanded changes along the curve.

Changes in Interest Rates, Ceteris Paribus, Cause a Shift in