Which of the following is one explanation as to why the aggregate demand curve slopes downward?
A) Decreases in the price level raise the interest rate and increase consumption spending.
B) Decreases in the price level raise the interest rate and increase investment spending.
C) Decreases in the U.S. price level relative to the price level in other countries lower net exports.
D) Decreases in the price level raise real wealth and increase consumption spending.
Answer: D
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Empirical studies conclude that advertising
A) raises prices in all markets. B) can reduce the prices of many goods. C) reduces the prices on all goods. D) has no impact on prices.
A firm is currently producing at the point where MC = MR. The situation for the firm at this point is P = $5, Q = 100, ATC = $6, AVC = $5.50. What do you recommend this firm do?
A) Increase production above the current output rate, because MC = MR at this rate of output. B) Continue to produce the current output rate, because P > AVC. C) Shut down, because AVC > P. D) Shut down, because ATC > P.