Which of the following correctly describes one reason why the aggregate demand (AD)curve slopes downward?
A)Aggregate expenditure increases as the price level rises,which leads to a rise in real GDP.
B)Increases in the price level cause consumers to substitute foreign goods for domestic goods,which leads to a rise in real GDP.
C)The increase in total output associated with the fall in the price level results in lower production costs.
D)When the price level falls,firms must be more competitive when output increases.
E)When the price level falls,consumers increase their saving rate.

Question

Quizplus · Accepted Answer

The aggregate demand curve slopes downward in part because as the price level increases, domestic goods become relatively more expensive compared to foreign goods. This causes consumers to substitute foreign goods for domestic goods, reducing the quantity of domestic goods demanded.

Which of the Following Correctly Describes One Reason Why the Aggregate