A decrease in interest rates caused by a change in the price level would cause a(n):
A) Decrease (or shift left) in aggregate demand
B) Increase (or shift right) in aggregate demand
C) Decrease in the quantity of real output demanded (or movement up along AD)
D) Increase in the quantity of real output demanded (or movement down along AD)

Question

Quizplus · Accepted Answer

A decrease in interest rates caused by a change in the price level would make borrowing cheaper, encouraging businesses and consumers to increase spending and investment in the economy. This would result in an increase in the quantity of real output demanded or movement down along the aggregate demand curve, making option D the correct choice.

A Decrease in Interest Rates Caused by a Change in the Price