The aggregate demand curve would shift to the left if
A)the economic conditions in Europe improved.
B)there was a tax decrease.
C)the Bank of Canada caused the real interest rate to increase.
D)the foreign exchange rate of the dollar decreased.

Question

Quizplus · Accepted Answer

If the Bank of Canada causes the real interest rate to increase, this will lead to a decrease in consumer and investment spending, which will shift the aggregate demand curve to the left. The other options either have a neutral or positive effect on aggregate demand, but only an increase in the real interest rate will have a negative impact on aggregate demand.

The Aggregate Demand Curve Would Shift to the Left If