Arrange the following steps in the correct order to illustrate how a decrease in interest rates affects the economy according to the AD-AS model: A) Increased consumption and investment lead to higher demand; B) Decrease in interest rates; C) Higher price levels and real income; D) Bond prices increase due to the inverse relationship with interest rates.

To understand how a decrease in interest rates affects the economy, we start with step B, where the decrease in interest rates occurs. When rates drop, it becomes cheaper for people and businesses to borrow money, which leads to step A, where increased consumption and investment take place. As people spend more and businesses invest in growth, this boosts overall demand in the economy. Following this rise in demand, we see step C, where higher price levels and real income result from increased economic activity. For example, if a family takes out a loan to buy a new home, they not only create demand for the house but also for furniture and renovations, stimulating further economic growth.