One Explanation of Why the Aggregate Demand Curve Is Downward

question 3

Multiple Choice

One explanation of why the aggregate demand curve is downward sloping is that:

• A) as prices fall, nominal income rises and so does the demand for real goods and services
• B) businesses increase investment spending in response to higher interest rates caused by inflation
• C) with falling prices, government decides to spend less to increase the price level
• D) rising prices reduce people's wealth and therefore reduce spending

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