The aggregate demand curve can be derived from the aggregate expenditures model as indicated by the fact that:
A)a decrease in the price level shifts the aggregate expenditures schedule downward and decreases real GDP.
B)a decrease in the price level shifts the aggregate expenditures schedule upward and decreases real GDP.
C)an increase in the price level shifts the aggregate expenditures schedule upward and increases real GDP.
D)an increase in the price level shifts the aggregate expenditures schedule downward and decreases real GDP.

Question

Quizplus · Accepted Answer

An increase in the price level reduces the purchasing power of money, leading to a decrease in aggregate expenditures, which shifts the aggregate expenditures schedule downward and decreases real GDP.

The Aggregate Demand Curve Can Be Derived from the Aggregate