One reason why the aggregate demand (AD)curve slopes downward is that
A)increased production results in lower production costs.
B)when the price level falls consumers increase their saving rate.
C)aggregate expenditure increases as the price level rises.
D)decreases in the price level cause increases in private- sector wealth which lead to increases in desired consumption.
E)when the price level falls firms must compete more when output increases.

Question

Quizplus · Accepted Answer

When the price level falls, the purchasing power of existing wealth increases, leading to an increase in the level of wealth. This increase in wealth causes an increase in desired consumption, which in turn drives up the aggregate demand for goods and services. Therefore, as prices fall, the aggregate demand increases, resulting in a downward sloping AD curve.

One Reason Why the Aggregate Demand (AD)curve Slopes Downward Is