Which of the Following Reasons Helps Explain Why the Aggregate

question 86

Multiple Choice

Which of the following reasons helps explain why the aggregate demand curve is downward sloping?

• A) The real balances effect or wealth effect: Consumers spend more on goods and services when the price level falls because lower prices increase consumer purchasing power.
• B) The producer-push effect: At less than full employment, increases in quantity demanded will raise price, and thus will motivate sellers to produce more.
• C) The hidden inflation effect: As the price level rises, consumers fail to recognize that prices are higher, and consequently they fail to reduce expenditures on goods and services.
• D) The cost-pull effect: As costs of production rise, consumers are pulled to buy more of the products they want most.

---

Definitions:

Collective Unconscious

A concept in psychology proposed by Carl Jung, referring to the part of the unconscious mind that is derived from ancestral memory and experience, shared among beings of the same species.

Latent Memory Traces

Nonconscious memories that, while not presently accessible, can influence behavior and thought processes.

Ancestral Past

The history and lineage of one's predecessors or the evolutionary history of a species.

Moral Component

The element of decision making that pertains to what is right and wrong, ethical and unethical.