If the Fed raises the federal funds rate,eventually the
A)AD curve shifts rightward and real GDP increases.
B)AD curve shifts leftward and real GDP decreases.
C)AS curve shifts rightward and real GDP increases.
D)AS curve shifts leftward and real GDP decreases.
E)AD curve shifts rightward and real GDP decreases.

Question

Quizplus · Accepted Answer

Raising the federal funds rate makes borrowing more expensive, reducing consumer spending and investment, which shifts the AD curve leftward, leading to a decrease in real GDP.

If the Fed Raises the Federal Funds Rate,eventually the