According to the aggregate demand curve, when the aggregate price level _____, the quantity of aggregate output _____.
A) rises; supplied falls
B) falls; demanded falls
C) rises; demanded falls
D) rises; demanded does not change

Question

Quizplus · Accepted Answer

According to the aggregate demand curve, when the aggregate price level rises, the quantity of aggregate output demanded falls. This is because higher prices lead to a decrease in purchasing power, which in turn reduces consumption, investment, and net exports, all of which are components of aggregate demand. Conversely, when the aggregate price level falls, the quantity of aggregate output demanded typically increases, as consumers and businesses are able to afford more goods and services. Choices A and B are incorrect because they reverse the relationship between changes in the aggregate price level and changes in the quantity of aggregate output supplied or demanded. Choice D is incorrect because it suggests that a change in the aggregate price level does not affect aggregate demand, which is inconsistent with the basic principles of macroeconomics.

According to the Aggregate Demand Curve, When the Aggregate Price