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Interest rates are corrected to control inflation in country as cost of borrowing is determined by interest rate that ultimately affects inflation.
What is aggregate-demand curve?
The demand and supply of all products and services produced by an economy are the main topics of discussion in macroeconomics.
As a result, the term "aggregate demand" is also used to refer to the total demand for all individual commodities and services.
Aggregate supply is the term used to describe the total supply of all separate commodities and services. The aggregate demand and supply for an economy can be depicted by a timetable, a curve, or an algebraic equation, just as the demand and supply for individual goods and services. The total quantity of all commodities (and services) that the economy demands at various price levels is represented by the aggregate demand curve. The money-demand curve moves to the right as the price level from increases.
The demand for money has increased, which leads the interest rate to increase from to. As the cost of borrowing is determined by the interest rate, an increase there will result in less demand for products and services. A downward-sloping aggregate-demand curve is used to depict this negative relationship between price level and quantity required.
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