How Does the Interest Rate Effect Help Explain Why the Aggregate

Multiple Choice

How does the interest rate effect help explain why the aggregate demand curve is downward-sloping?

A) Because it suggests that a lower price level causes a higher interest rate and therefore a lower level of aggregate expenditures.
B) Because it suggests that a lower interest rate causes a higher price level and therefore a lower level of aggregate expenditures.
C) Because it suggests that a lower price level causes a lower interest rate and therefore a higher level of aggregate expenditures.
D) Because it suggests that a lower interest rate causes a lower price level and therefore a higher level of aggregate expenditures.