ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Option D The wealth effect of a change in the aggregate price level is the change in consumer spending caused by the altered purchasing power of consumers’ assets. Because of the wealth effect, consumer spending, C, falls when the aggregate price level rises, leading to a downward-sloping aggregate demand curve.

Detailed explanation-2: -The aggregate demand curve represents the total of consumption, investment, government purchases, and net exports at each price level in any period. It slopes downward because of the wealth effect on consumption, the interest rate effect on investment, and the international trade effect on net exports.

Detailed explanation-3: -A fall in net exports reduces the aggregate demand. Thus, at a higher price level, aggregate demand decreases, and the curve slopes downward.

Detailed explanation-4: -To summarize: • The AD curve indicates levels of equilibrium GDP at different possible rates of inflation. The AD curve can be shifted by changes in levels of autonomous consumer spending, autonomous investment, fiscal policy, net exports, or by major changes in monetary policy.

Detailed explanation-5: -Answer and Explanation: The aggregate demand curve is downward sloping because of a. the interest rate effect. As the price decreases-which means less money is demanded to buy things-we are using less cash, so the money supply demand for cash decreases.