Within the AD/AS Model, If Consumers Increase Their Savings and Cut

question 179

Multiple Choice

Within the AD/AS model, if consumers increase their savings and cut back on their spending, the

• A) natural rate of unemployment will increase.
• B) real interest rate will decrease and, thereby, cushion the reduction in consumption spending.
• C) real interest rate will increase because of the higher rate of saving.
• D) long-run aggregate supply will decrease to restore equilibrium.