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AP® Macroeconomics

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Moderate

Increased Interest Rates and the AD/AS Model

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If the Federal Reserve increased interest rates, what effect would it have on the AD/AS model in the short run?

A

Investment spending would increase and short-run aggregate supply would shift to the right.

B

Investment spending would decrease and short-run aggregate supply would shift to the left.

C

Investment spending would decrease and aggregate demand would shift to the right.

D

Investment spending would decrease and aggregate demand would shift to the left.

E

Investment spending would increase and aggregate demand would shift to the right.