What Is the Relationship Between Higher Interest Rates and Aggregate

Multiple Choice

What is the relationship between higher interest rates and aggregate expenditure?

A) Higher interest rates lower consumption and investment but raise government expenditures and net exports, and thus they have an indeterminate effect on aggregate expenditure.
B) Higher interest rates boost aggregate expenditure.
C) Aggregate expenditures are determined independently from changes in real interest rates.
D) Higher interest rates cause aggregate expenditure to fall.