Question

An increase in interest rates affects aggregate demand by A. shifting the aggregate demand curve to the​ left, reducing real GDP and lowering the price level. B. shifting the aggregate demand curve to the​ right, increasing real GDP and lowering the price level. C. shifting the aggregate supply curve to the​ left, decreasing real GDP and increasing the price level. D. shifting the aggregate supply curve to the​ right, increasing real GDP and lowering the price level.

Answer 1

aggregate demand will decrease, lowering both real GDP and the price level

Step-by-step explanation:

Any shift in aggregate supply or aggregate demand will have an impact on real GDP and on price level.

Answer 2

Answer: B. shifting the aggregate demand curve to the​ right, increasing real GDP and lowering the price level.

Explanation: A low interest rate increases the demand for investment as the cost of investment falls with the interest rate. Thus, a drop in the price level decreases the interest rate, which increases the demand for investment and thereby increases aggregate demand.