Raising the federal funds rate shifts the aggregate demand curve ________,so that real GDP________ and the price level ________.
A)rightward;increases;rises
B)leftward;decreases;rises
C)rightward;increases;falls
D)leftward;increases;rises
E)leftward;decreases;falls

Question

Quizplus · Accepted Answer

Raising the federal funds rate makes borrowing more expensive, reducing consumption and investment, which shifts the aggregate demand curve leftward, leading to a decrease in real GDP and a fall in the price level.

Raising the Federal Funds Rate Shifts the Aggregate Demand Curve