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An Aggregate Demand Curve Slopes Downward Against Prices Because

Question 54

Multiple Choice

An aggregate demand curve slopes downward against prices because


A) the quantity demanded almost always falls as the price climbs.
B) increases in the price level effectively reduce the real money supply and thereby increase interest rates, lower investment, and cause GDP to contract.
C) increases in the price level automatically increase real interest rates and therefore require a contraction in GDP to maintain equality of supply and demand in the money market.
D) reductions in the price level increase real GDP by the simple algebra of dividing nominal GDP by a price level.
E) none of the above.

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