An Aggregate Demand Curve Slopes Downward Against Prices Because

question 44

Multiple Choice

An aggregate demand curve slopes downward against prices because

• A) the quantity demanded almost always falls as the price climbs.
• B) increases in the price level effectively reduce the real money supply and thereby increase interest rates, lower investment, and cause GDP to contract.
• C) increases in the price level automatically increase real interest rates and therefore require a contraction in GDP to maintain equality of supply and demand in the money market.
• D) reductions in the price level increase real GDP by the simple algebra of dividing nominal GDP by a price level.
• E) none of the above.

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