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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