This will affect consumer spending and investment.

This will shift the AD curve to the left.

Higher interest rates means that the cost of borrowing has increased. The effect on consumers will be that they are not as willing to borrow money (e.g. through a credit card) to fund their consumption. Additionally, any outstanding debt that households have (e.g. variable-rate mortgages) will now have higher interest payments, leaving households with less discretionary income.

The higher interest rate will also mean that the return to savings has increased. Consumers may decide to save more of their money rather than spend it.

The higher cost of borrowing will affect investment. Businesses will spend less on new capital equipment if the cost of financing this purchase increases.

These effects mean that, for any given price level, AD will be lower.