The curve that depicts aggregate demand slopes downward because:
A) as the overall price level (P) falls, real GDP (y) falls.
B) as the overall price level (P) rises, real GDP (y) does not change.
C) as the overall price level (P) rises, real GDP (y) rises.
D) as the overall price level (P) rises, real GDP (y) falls.

Question

Quizplus · Accepted Answer

When the overall price level rises, there is a decrease in purchasing power and an increase in the cost of inputs for businesses. As a result, consumer expenditures and investments decrease, leading to a decrease in aggregate demand and real GDP.

The Curve That Depicts Aggregate Demand Slopes Downward Because