The Aggregate Demand Curve Slopes Downward Because

question 84

Multiple Choice

The aggregate demand curve slopes downward because

• A)when inflation is lower, the Fed will lower the interest rate and potential GDP will increase.
• B)when inflation is lower, consumers want to buy more goods and services.
• C)when inflation is lower, the real interest rate is higher and firms will invest less.
• D)when inflation is lower, the Fed will lower the interest rate and spending will increase.
• E)when prices are lower, consumers want to buy more goods and services.

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Definitions:

Total Revenue

The total amount of money received by a firm from the sale of its goods or services, calculated as price times quantity sold.

Total Variable Cost

The total of all costs that vary with the level of production, such as materials and labor costs.

Total Fixed Cost

The sum of all costs that do not change with the level of production or output in the short term, such as rent or salaries.

Purely Competitive Market

A market structure characterized by many buyers and sellers, homogeneous products, and free entry and exit, leading to price taking behavior.