Using aggregate demand and aggregate supply, explain what happens in the short run if the Federal Reserve raises interest rates in the economy? Assume that the economy is at full employment before the interest rate increase. Be sure to detail what happens to:

• aggregate demand
• the price level
• the level of GDP
• and unemployment.

You will be assessed on the following:

• explanation of what happens with the aggregate demand in the short run if the Federal Reserve raises interest rates in the economy
• explanation of what happens with the price level in the short run if the Federal Reserve raises interest rates in the economy
• explanation of what happens with the level of GDP in the short run if the Federal Reserve raises interest rates in the economy
• explanation of what happens with the unemployment rate in the short run if the Federal Reserve raises interest rates in the economy