ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -At the higher price level, the consumption, investment, and net export components of aggregate demand will all fall; that is, there will be a reduction in the total quantity of goods and services demanded, but not a shift of the aggregate demand curve itself.

Detailed explanation-2: -Along the AD curve, real GDP increases and the price level decreases. In other words, AD slopes down. Changes in the price level will cause a movement along the AD curve.

Detailed explanation-3: -The aggregate demand curve shifts to the right as the components of aggregate demand-consumption spending, investment spending, government spending, and spending on exports minus imports-rise. The AD curve will shift back to the left as these components fall.

Detailed explanation-4: -Explain that from a macroeconomic perspective, an increase in the aggregate price level diminishes all buyers’ purchasing power. Thus, as the aggre-gate price level rises, the quantity of aggregate output demanded decreases, as illustrated by the downward-sloping aggregate demand curve.