ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The exchange-rate effect
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The wealth effect
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The fiscal effect
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The interest-rate effect
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None of the above
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Detailed explanation-1: -It slopes downward because of the wealth effect on consumption, the interest rate effect on investment, and the international trade effect on net exports. The aggregate demand curve shifts when the quantity of real GDP demanded at each price level changes.
Detailed explanation-2: -This downward slope indicates that increases in the price level of outputs lead to a lower quantity of total spending. The graph shows a downward sloping aggregate demand curve, showing that, as the price level rises, the amount of total spending on domestic goods and services declines.
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: -Which of the following effects best explains the downward slope of the aggregate demand curve? an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending.