By looking at aggregate demand via its component parts,we can conclude that the aggregate demand curve is downward sloping because
A)a lower inflation rate causes the real interest rate to fall,and stimulates planned investment spending.
B)a lower inflation rate causes the real interest rate to rise,and stimulates planned investment spending.
C)a higher inflation rate causes the real interest rate to fall,and stimulates planned investment spending.
D)a higher inflation rate causes the real interest rate to rise,and stimulates planned investment spending.

Question

Quizplus · Accepted Answer

According to the components of aggregate demand, a lower inflation rate leads to a higher real money supply, which brings down the real interest rate. A lower real interest rate stimulates planned investment spending, thereby increasing aggregate demand. This is consistent with the downward slope of the aggregate demand curve.

By Looking at Aggregate Demand Via Its Component Parts,we Can