Which of the following is one explanation as to why the aggregate demand curve slopes downward?
A)Increases in the price level lower the interest rate and decrease consumption spending.
B)Increases in the price level lower the interest rate and decrease investment spending.
C)Increases in the Canadian price level relative to the price level in other countries lower net exports.
D)Increases in the price level raise real wealth and lower consumption spending.
E)Increasing prices reduce nominal interest rates and spur additional government spending.

Question

Quizplus · Accepted Answer

Increases in the Canadian price level relative to the price level in other countries lower net exports, since higher prices make Canadian goods relatively more expensive and less desirable to foreign buyers. This decreases demand for Canadian products, decreasing aggregate demand.

Which of the Following Is One Explanation as to Why