The best explanation of why the aggregate demand curve has a negative slope is that
A) at a higher price level households cut back on their spending on goods and services.
B) at a higher price level business firms wish to produce more goods and services.
C) a higher price level results in lower real balances and a higher real interest rate.
D) a higher price level results in less government spending on transfers, such as unemployment insurance and social security payments.
C
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If you have $5,000 in wealth and the price level decreases by 20 percent, then
A) the $5,000 will buy fewer goods and services. B) the $5,000 will buy more goods and services. C) the real value of the $5,000 decreases. D) the real value of the $5,000 remains constant.
Because of the free-rider problem, ________
A) there is an efficient allocation of resources for common resources B) private provision leads to the production of more than the efficient quantity of a public good C) private provision leads to the production of less than the efficient quantity of a public good D) the public uses too little of a common resource