One Explanation for the Negative Slope of the Aggregate Demand

question 11

Multiple Choice

One explanation for the negative slope of the aggregate demand curve is that

• A)as prices rise,nominal income falls and so does the demand for real goods and services
• B)falling prices make people feel poorer and reduce spending
• C)as prices rise,government spends less to drive the price level back down
• D)businesses increase spending when inflation is high and rising
• E)as prices rise,domestic goods become more expensive relative to foreign goods,which reduces exports

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Definitions:

T-bills Yield

The return on investment for U.S. Treasury bills, being a measure of the interest income earned from holding these government securities.

Collect Funds

The process of gathering or accumulating money from different sources or transactions.

Flexible Cash

Funds that are readily available for use without restrictions or conditions, allowing for immediate allocation or investment.

Opportunity Costs

The cost of forgoing the next best alternative when making a decision, representing the benefits one misses out on.