The aggregate demand curve slopes downward because of
A)import and taxation effects.
B)the wealth and substitution effects.
C)the MPC.
D)the multiplier.

Question

Quizplus · Accepted Answer

The wealth and substitution effects state that as the price level rises, people will substitute away from goods and services towards financial assets, and that as the price level falls, people will substitute away from financial assets towards goods and services. This causes the aggregate demand curve to slope downward.

The Aggregate Demand Curve Slopes Downward Because of