The aggregate demand curve is negatively sloped because a lower price level
A) reduces the real money supply.
B) increases the real money supply.
C) reduces aggregate income.
D) increases aggregate income.

Question

Quizplus · Accepted Answer

A lower price level increases the real money supply because the purchasing power of money increases, allowing consumers to buy more goods and services for the same amount of nominal money. This increase in the real money supply lowers interest rates, stimulates investment and consumption, and thus increases aggregate demand.

The Aggregate Demand Curve Is Negatively Sloped Because a Lower