The aggregate demand curve is downward sloping because:
A. an increase in the price level will cause an increase in spending.
B. at lower price levels, real wealth decreases, causing a decrease in the quantities of goods and services demanded.
C. at lower price levels, interest rates decrease, causing a decrease in the quantities of goods and services demanded.
D. at lower price levels, exports increase, causing an increase in real GDP.
Answer: D
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Monetary policy can have substantial effects on the economy even when nominal interest rates are very low
A) since real rates are what affects borrowing and spending decisions. B) by improving borrower and bank balance sheets. C) by reducing transactions costs. D) only when the policy is substantial.
All of the following are reasons for the downward-sloping aggregate demand curve except
A) as the price level decreases, the quantity demanded of real GDP decreases because goods and services are more expensive. B) as the price level increases, the real value of household wealth declines, reducing consumption. C) a higher price level increases the demand for money, causing an increase in the interest rate which reduces spending on investment goods and consumer durables. D) if the price level rises in a country relative to price levels in other countries, net exports will decrease in the original country.
In a Cournot equilibrium, each firm chooses an output level that
a. maximizes joint profits. b. maximizes the price received. c. maximizes profits given what the other firm produces. d. maximizes revenue given what the other firm produces.
The bottom quintile of income earners would be those whose income is
A. in the highest 20 percent. B. in the lowest 20 percent. C. in the lowest 5 percent. D. lower than the highest 20 percent of households.