The aggregate demand curve is downward sloping because a higher inflation rate leads the central bank to ________ real interest rates,thereby ________ the level of equilibrium aggregate output. ,everything else held constant.
A)raise;lowering
B)raise;raising
C)reduce;lowering
D)reduce;raising

Question

Quizplus · Accepted Answer

A higher inflation rate typically leads the central bank to raise real interest rates as a measure to control inflation. Higher real interest rates make borrowing more expensive, which tends to reduce consumption and investment, thereby lowering the level of equilibrium aggregate output.

The Aggregate Demand Curve Is Downward Sloping Because a Higher