The aggregate demand curve is downward sloping because,ceteris paribus:
A) People are willing and able to buy more goods and services at lower average prices.
B) People buy fewer goods and services at lower average incomes.
C) A higher average price level induces producers to offer more output.
D) A higher average price level causes incomes to increase.

Question

Quizplus · Accepted Answer

The downward slope of the aggregate demand curve indicates that as the overall price level decreases, people are willing and able to buy more goods and services due to their increased purchasing power. This is known as the wealth effect, which suggests that when prices are lower, people feel relatively richer and thus have more spending power. Conversely, when prices are higher, people feel relatively poorer and may reduce their spending.

The Aggregate Demand Curve Is Downward Sloping Because,ceteris Paribus