Which of the following helps explain why the aggregate demand curve slopes downward?
A) If the price level increases, the purchasing power of the fixed quantity of money decreases, causing people to buy less.
B) If the price level increases, the purchasing power of the fixed quantity of money increases, causing people to buy more.
C) If domestic prices increase, we substitute domestic goods for imported goods.
D) If domestic prices decrease, we substitute imported goods for domestic goods.

Question

Quizplus · Accepted Answer

The decrease in purchasing power due to an increase in price level causes people to buy less, leading to a downward-sloping aggregate demand curve.

Which of the Following Helps Explain Why the Aggregate Demand