One Reason That the Aggregate Demand Curve Has a Negative

question 12

Multiple Choice

One reason that the aggregate demand curve has a negative slope is because

• A) people buy fewer goods and save more when the price level rises because their real wealth decreases.
• B) firms produce more when the price rises.
• C) people earn more money when output rises.
• D) The premise of the question is wrong because the aggregate demand curve has a positive slope.

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Definitions:

Bushels

A measurement of volume mainly used in the United States for quantifying agricultural products.

Diminishing Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain at a constant.

Average Variable Cost

The total variable cost divided by the quantity of output produced, representing the average cost of production excluding fixed costs.

Average Total Cost

The sum of all production costs divided by the quantity of output produced, representing the cost per unit of output including both fixed and variable costs.