Which component of aggregate demand tends to be most sensitive to changes in interest rates by the Federal Reserve?

Question

Quizplus · Accepted Answer

Investment spending on machinery, factories, and new homes is most sensitive to changes in interest rates because the cost of borrowing affects businesses' and consumers' decisions on whether to invest in new capital or housing. Lower interest rates make borrowing cheaper, encouraging more investment, while higher rates do the opposite.

Which Component of Aggregate Demand Tends to Be Most Sensitive