Which statement best explains the downward slope of the aggregate-demand curve?
A) As the Canadian price level increases, the dollar depreciates and people buy more imports.
B) As the Canadian price level increases, the interest rate falls and firms invest less.
C) As the Canadian price level increases, people feel less wealthy and buy less goods and services.
D) As the Canadian price level increases, people buy more substitute goods.

Question

Quizplus · Accepted Answer

As the price level increases, people's purchasing power decreases, causing them to feel less wealthy and choose to buy fewer goods and services. This leads to a decrease in overall demand in the economy, resulting in the downward slope of the aggregate-demand curve. Choices A, B, and D do not fully explain the relationship between the price level and the aggregate demand.

Which Statement Best Explains the Downward Slope of the Aggregate-Demand