The aggregate demand curve
A) is upsloping because a higher price level is necessary to make production proﬁtable as production costs rise.
B) is downsloping because production costs decline as real output increases.
C) shows the amount of expenditures required to induce the production of each possible level of real output.
D) shows the amount of real output that will be purchased at each possible price level.

Question

Quizplus · Accepted Answer

The aggregate demand curve shows the amount of real output that will be purchased at each possible price level. This means that as the price level increases, the amount of real output demanded by consumers and businesses will decrease, and vice versa. It is not upsloping because higher production costs do not necessarily make production more profitable, and it is not related to production costs declining as real output increases like in option B. Option C is somewhat related to the concept of aggregate demand, but it does not fully capture the idea that the curve shows the amount of real output purchased at different price levels.

The Aggregate Demand Curve