One reason the aggregate demand curve is downward sloping is because of the
A) interest rate effect.
B) welfare effect.
C) price effect.
D) tariff effect.

Question

Quizplus · Accepted Answer

The downward slope of the aggregate demand curve is due to the interest rate effect, whereby a decrease in the price level leads to a decrease in interest rates and an increase in the quantity of goods and services demanded. This is one of the key reasons why the aggregate demand curve is typically presented as sloping downwards.

One Reason the Aggregate Demand Curve Is Downward Sloping Is