Question

Consider the​ downward-sloping aggregate demand​ (AD) curve to the right. Which of the following results in a movement from point A to point B​ (a movement up along the AD​ curve) or from point A to point C​ (a movement down along the AD​ curve)? ​

A. Multiplier effect
B. Inflation effect
C. Wealth effect
D. Interest rate effect

Answer 1

D. Interest rate effect

Step-by-step explanation:

Interest Rate Effect can be defined as the rate that occur due to the change in borrowing and spending attitude of a person after the interest rate might have been adjusted because in a situation where the interest rates rises it will enable both businesses and consumers to cut back on their spending the result of which will cause earnings to fall and stock prices to drop due to the fact that as the interest rates move up, the cost of borrowing becomes more expensive which is why interest rates that are high tend to always reduce inflationary pressures and cause an appreciation in the exchange rate