A decrease in the price level will
A)shift the aggregate demand curve to the left
B)shift the aggregate demand curve to the right
C)result in a movement up and to the left along the aggregate demand curve
D)result in a movement down and to the right along the aggregate demand curve
E)have no effect on the aggregate quantity demanded

Question

Quizplus · Accepted Answer

A decrease in the price level leads to an increase in aggregate demand due to the wealth effect and interest rate effect. As a result, the aggregate demand curve shifts to the right. A movement down and to the right along the aggregate demand curve represents an increase in the aggregate quantity demanded. Therefore, option D is the correct answer.

A Decrease in the Price Level Will