Changes in the price level affect which components of aggregate demand?
A)only consumption and investment
B)only consumption and net exports
C)only investment
D)consumption,investment,and net exports

Question

Quizplus · Accepted Answer

Changes in the price level can affect consumption as high prices may reduce the purchasing power of consumers and investments as high prices may increase the cost of borrowing and reduce the profitability of investments. In addition, changes in the price level can affect net exports as higher prices may make domestic goods relatively more expensive compared to foreign goods, leading to a decrease in exports and an increase in imports. Therefore, all components of aggregate demand may be affected by changes in the price level.

Changes in the Price Level Affect Which Components of Aggregate