Which of the following explains why the aggregate demand curve slopes downward?
A)If the price level increases,we feel poorer and therefore buy less.
B)If the price level increases,we feel richer and therefore buy more.
C)If domestic prices increase,we substitute domestic goods for imported ones.
D)If the price of a particular good increases,we substitute away from that good.
E)A decrease in the price of a particular good is like an increase in income and therefore we buy more.

Question

Quizplus · Accepted Answer

A decrease in the price level increases our purchasing power and makes us feel wealthier, which leads to an increase in consumption. Conversely, an increase in the price level decreases our purchasing power and makes us feel poorer, which leads to a decrease in consumption. This inverse relationship between the price level and consumption leads to the downward slope of the aggregate demand curve.

Which of the Following Explains Why the Aggregate Demand Curve