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The interest-rate effect creates a downward sloping aggregate demand curve because a higher price level ______. Multiple choice question. decreases money demand which decreases interest rates and decreases the amount of real GDP increases money demand which increases interest rates and decreases the amount of real GDP increases money demand which decreases interest rates and decreases the amount of real GDP increases money demand which increases interest rates and increases the amount of real GDP

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interest-rate effect usually bring about downward sloping aggregate demand curve which is as result of higher price level  causes Increases money demand which increases interest rates and decreases the amount of real GDP.

  • The interest rate effect can be regarded as the change in borrowing as well as spending behaviors which do occur when adjustment has been made to the interest rate.

  • This effect do cause the aggregate demand curve to slope, and this is as a result of higher price level that make the money demand to increase.

Therefore, an increase in interest rates as well as decreases in the amount of real GDP.

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