One Explanation of Why the Aggregate Demand Curve Is Downward

question 50

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)rising prices reduce people's wealth and thereby reduce spending
• C)with falling prices,government decides to spend less to increase the price level
• D)businesses increase investment spending in response to higher interest rates caused by inflation
• E)as prices fall,domestically produced goods become more expensive relative to foreign-produced products,which increases production

---

Definitions:

Treasury Shares

Shares that were issued and later repurchased by the issuing company, reducing the amount of outstanding stock.

Shareholders' Equity

The residual interest in the assets of a company after deducting liabilities, representing the ownership equity spread among shareholders.

Cash Dividends

A distribution of a portion of a company's earnings, decided by the board of directors, to its shareholders in the form of cash.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.