By looking at aggregate demand via its component parts,we can conclude that the aggregate demand curve is downward sloping because
A)a lower price level,holding the nominal quantity of money constant,leads to a larger quantity of money in real terms,causes the interest rate to fall,and stimulates planned investment spending.
B)a lower price level,holding the nominal quantity of money constant,leads to a larger quantity of money in nominal terms,causes the interest rate to rise,and stimulates planned investment spending.
C)a higher price level,holding the nominal quantity of money constant,leads to a larger quantity of money in real terms,causes the interest rate to fall,and stimulates planned investment spending.
D)a higher price level,holding the nominal quantity of money constant,leads to a smaller quantity of money in real terms,causes the interest rate to fall,and stimulates planned investment spending.

Question

Quizplus · Accepted Answer

The downward slope of the aggregate demand curve is based on the relationship between the price level and the real quantity of goods and services demanded by consumers, businesses, and government. As the price level falls, the real value of money increases, leading to a decrease in interest rates and an increase in investment spending. This leads to an overall increase in demand and a downward-sloping aggregate demand curve. Choice A correctly describes this relationship, as a lower price level leads to a larger quantity of money in real terms and stimulates investment spending.

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