Explain How the Substitution Effect Will Affect Aggregate Demand When

question 46

Multiple Choice

Explain how the substitution effect will affect aggregate demand when the price level decreases.

• A)The substitution effect will cause aggregate demand to increase.
• B)The substitution effect will cause aggregate demand to decrease.
• C)There is no substitution effect as there's no substitute for all goods.
• D)There's no substitution effect if incomes are also rising.
• E)There is a substitution effect that is smaller than the income effect,so it's uncertain what will happen to aggregate demand.

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Definitions:

Spontaneous

Occurring naturally, without being planned or premeditated.

Impractical

Impractical describes something that is not feasible or realistic in terms of implementation or use, often due to it being too complex or costly.

Joint Goal

A shared aim or objective that is pursued by multiple parties or individuals working together collaboratively.

Common End

A shared goal or objective that multiple parties aim to achieve through collaboration or agreement.