Which of the Following Explanations for the Negative Slope of the AD

question 56

Multiple Choice

Which of the following explanations for the negative slope of the AD curve is correct? A fall in the price level,with an unchanged money supply,causes the transactions demand for money to

• A)decrease,shifting the MD curve downward,lowering the interest rate and increasing desired investment,causing the AE curve to shift upward.
• B)decrease,shifting the MD curve upward,raising the interest rate and increasing desired investment,causing the AE curve to shift upward.
• C)increase,shifting the MD curve upward,raising the interest rate and decreasing desired investment,causing the AE curve to shift upward.
• D)increase,shifting the MD curve downward,lowering the interest rate and decreasing desired investment,causing the AE curve to shift downward.
• E)increase,shifting the MD curve upward,raising the interest rate and decreasing desired investment,causing the AE curve to shift downward.

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Definitions:

Perpetual Inventory System

An inventory management method that tracks the sale and purchase of inventory in real time to ensure accurate stock levels.

Payment on Account

A transaction that reduces the amount owed on an outstanding accounts payable balance.

Gross Profit

The financial metric that represents the difference between revenue and the cost of goods sold, before deducting overhead, payroll, taxation, and interest payments.

Operating Expenses

Costs that a business incurs through its normal business operations, including rent, salaries, and utility expenses.