Changes in the price level affect which component of aggregate demand?
A) only consumption and investment
B) only consumption and net exports
C) only consumption
D) consumption, investment, and net exports

Question

Quizplus · Accepted Answer

Changes in the price level affect consumption through the wealth effect and the interest rate effect, investment through the cost of borrowing, and net exports through the impact on exports and imports. Therefore, all three components of aggregate demand are affected by changes in the price level.

Changes in the Price Level Affect Which Component of Aggregate