The dynamic aggregate demand curve has a negative slope for all of the following reasons except:
A) the reduction in real wealth caused by inflation.
B) the fact that high rates of inflation are good for the stock market.
C) the redistribution that occurs as inflation has a greater impact on the poor than it does on the wealthy.
D) higher current inflation leads policymakers to increase the real interest rate, which depresses various components of aggregate expenditures.

Question

Quizplus · Accepted Answer

The statement "high rates of inflation are good for the stock market" is incorrect because inflation can lead to market instability and uncertainty, which can be detrimental to the stock market. The other three reasons (reduction in real wealth, redistribution, and the effect of inflation on the real interest rate) are all factors that can lead to the negative slope of the dynamic aggregate demand curve.

The Dynamic Aggregate Demand Curve Has a Negative Slope for All