One explanation of why the aggregate demand curve is downward sloping is that
A)as prices fall,nominal income rises and so does the demand for real goods and services
B)rising prices reduce people's wealth and thereby reduce spending
C)with falling prices,government decides to spend less to increase the price level
D)businesses increase investment spending in response to higher interest rates caused by inflation
E)as prices fall,domestically produced goods become more expensive relative to foreign-produced products,which increases production

Question

Quizplus · Accepted Answer

As prices rise, the real wealth of individuals decreases, leading to reduced consumer spending, which contributes to the downward slope of the aggregate demand curve.

One Explanation of Why the Aggregate Demand Curve Is Downward