Which component of aggregate demand is most likely to change as a result of the interest-rate effect?
A)Consumption.
B)Investment.
C)Government spending.
D)Exports.
E)Imports.

Question

Quizplus · Accepted Answer

The interest-rate effect refers to the reduction in investment that occurs as interest rates increase. Therefore, changes in interest rates are most likely to have a significant impact on the level of investment spending, which is a component of aggregate demand.

Which Component of Aggregate Demand Is Most Likely to Change