Identify the correct statement.
A) An increase in the price level in an economy will increase the real value of dollar-denominated assets.
B) An increase in the price level in an economy will shift the aggregate expenditure line upward.
C) An increase in the price level in an economy will decrease the equilibrium level of output demanded.
D) An increase in the price level in an economy will decrease the real GDP demanded along the aggregate demand curve.
E) An increase in the price level in an economy will shift the aggregate demand curve rightward.

Question

Quizplus · Accepted Answer

According to the downward slope of aggregate demand (AD) curve, an increase in the price level leads to a decrease in real GDP demanded (along the AD curve). This is because as prices rise, the purchasing power of consumers decreases, and they cannot afford the same quantity of goods and services.

Identify the Correct Statement