The interest rate effect, the real balance effect and the foreign purchases effect suggests that the aggregate demand curve is
A)downward sloping.
B)horizontal.
C)vertical.
D)shaped as a backward L.

Question

Quizplus · Accepted Answer

The interest rate effect, real balance effect, and foreign purchases effect all suggest that as the price level increases, the quantity demanded will decrease. This is consistent with a downward-sloping aggregate demand curve.

The Interest Rate Effect, the Real Balance Effect and the Foreign