One of the reasons why the aggregate demand (AD)curve slopes downward is that
A)aggregate expenditure increases as the price level rises.
B)increases in the price level cause consumers to substitute foreign goods for domestic goods.
C)increased production 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 partly because as the price level rises, domestic goods become relatively more expensive compared to foreign goods, leading consumers to substitute foreign goods for domestic goods, reducing the quantity of domestic goods demanded.

One of the Reasons Why the Aggregate Demand (AD)curve Slopes