3 good questions and answers about "the Interest rate effect"

Who are the two components that the interest rate effect directly affected by?
The consumers: by deciding whether to hold money
the investors: by deciding whether to borrow money
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What effects does the increase in aggregate price level have of the consumer purchasing power of a given amount of money holdings? what effects does this have on the interest rates?
  • an increase in aggregate price level reduces the consumer purchasing power of a given amount of money holdings
  • the more money people hold the less funds available, so the interest rate increases.
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How does a rise in interest rate affect effect the planned investment.
  • When people hold more money the save less
  • when they save less the supply of money decreases
  • when the supply of money decreases the price of money, the interest rate increases.
  • when the interest rate increases, the demand for money decreases and investors a not willing to invest as much
  • when investment decreases aggregate expenditure decreases, and planned aggregate expenditure decreases
  • when planned aggregate expenditure  decreases the aggregate demand shifts to the left
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