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:

Consumer

An individual or group who purchases goods or services for personal use.

Producer

An individual or entity that creates or supplies goods or services.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product or service.

Increase Quantity

A strategy or action aimed at raising the amount of goods or services produced or available.