Interest rates rise.Instructions: Grab either the AD or AS curve and drag and drop it to a new position to represent the resulting shift in AD or AS.
Question
Interest rates rise.Instructions: Grab either the AD or AS curve and drag and drop it to a new position to represent the resulting shift in AD or AS.
Solution
When interest rates rise, it becomes more expensive for businesses and consumers to borrow. This can lead to a decrease in spending and investment, which would cause a decrease in aggregate demand. Therefore, you would grab the AD curve and shift it to the left to represent this decrease in aggregate demand.
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