An output-induced monetary policy response to lower interest rates causes a:
A)right shift of the aggregate supply curve.
B)left shift of the aggregate demand curve.
C)right shift of the aggregate demand curve.
D)movement along the same aggregate demand curve.

Question

Quizplus · Accepted Answer

A monetary policy response to lower interest rates is aimed at stimulating economic activity by making borrowing cheaper. This encourages spending and investment, leading to an increase in aggregate demand, hence a rightward shift of the aggregate demand curve.

An Output-Induced Monetary Policy Response to Lower Interest Rates Causes