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 U.S.price level relative to the price level in other countries lowers net exports.
D)Increases in the price level raise real wealth and lowers consumption spending.

Question

Quizplus · Accepted Answer

Increases in the U.S. price level relative to the price level in other countries lowers net exports. As the price level in the US increases relative to other countries, US exports become more expensive, causing a decrease in net exports (exports minus imports). This decrease in net exports reduces aggregate demand, causing the aggregate demand curve to slope downward.

Which of the Following Is One Explanation as to Why