Which Effect Best Explains the Downward Slope of the Aggregate

question 108

Multiple Choice

Which effect best explains the downward slope of the aggregate demand curve?

• A)a multiplier effect
• B)an income effect
• C)a substitution effect
• D)a real-balances effect

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Definitions:

Bond Discount

The difference between the face value of a bond and the price for which it sells, when the bond's market price is lower than its face value.

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation each year over the useful life of the asset.

Semiannual Amortization

The process of gradually writing off the initial cost of an asset over a period, with adjustments made twice a year.

Amortization

The gradual reduction of a debt over a period of time through regular payments, which cover interest and principal.