The most important reason for the slope of the aggregate-demand curve is that as the price level
A)increases,interest rates increase,and investment decreases.
B)increases,interest rates decrease,and investment increases.
C)decreases,interest rates increase,and investment increases.
D)decreases,interest rates decrease,and investment decreases.

Question

Quizplus · Accepted Answer

As the price level increases, the interest rates increase because lenders demand higher interest rates to compensate for the decreasing purchasing power of their money. This increase in interest rates reduces investment, as it becomes more expensive for firms to borrow money to invest in new projects. Hence, option A is the correct choice.

The Most Important Reason for the Slope of the Aggregate-Demand