What Is the Interest Rate Effect That Explains Why the Aggregate

question 115

Multiple Choice

What is the interest rate effect that explains why the aggregate demand curve slopes downward?

• A) It refers to the effect of changes in the price level on quantity of investment demanded which in turn affects interest rates.
• B) It refers to the effect of interest rates on borrowing which in turn affects consumption spending.
• C) It refers to the effect of changes in the price level on interest rates which in turn affects the quantity of investment demanded.
• D) It refers to the shifts in aggregate demand when interest rates change.