If the price level in the United States decreases, domestic goods will become relatively cheaper than foreign goods, the demand for U.S.-made goods will increase, and the U.S. aggregate demand curve will shift to the right.

Question

Quizplus · Accepted Answer

A decrease in the price level makes domestic goods cheaper relative to foreign goods, increasing demand for U.S.-made goods. However, this change affects the quantity of goods demanded rather than shifting the aggregate demand curve itself. The aggregate demand curve represents the total demand for goods and services in the economy at different price levels, and a movement along the curve occurs when the price level changes, not a shift of the curve.

If the Price Level in the United States Decreases, Domestic