As the interest rate decreases, the planned aggregate expenditure curve shifts downward

Economics Dec 12, 2020

As the interest rate decreases, the planned aggregate expenditure curve shifts downward. A. True B. False

Expert Solution

A. True

This can be explained below as:-

When the interest rate increases, the loans become costlier to the people and thus this results in lesser loans. Due to lesser loans, the aggregate consumption expenditure reduces or say shift downwards because people do not have enough money to demand goods now.

Therefore, due to rise in interest rates, aggregate expenditure curve shifts downward.
So, the answer is option (a) True.

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