In the short run, lowering the overnight loans rate shifts the ________ curve ________ and ________ real GDP.
A)aggregate demand; leftward; decreases
B)aggregate demand; rightward; increases
C)short-run aggregate supply; rightward; increases
D)aggregate demand; leftward; increases
E)long-run aggregate supply; rightward; increases

Question

Quizplus · Accepted Answer

Lowering the overnight loans rate reduces borrowing costs, leading to increased spending and investment, which in turn increases aggregate demand and shifts the AD curve rightward. This results in an increase in real GDP.

In the Short Run, Lowering the Overnight Loans Rate Shifts