Aggregate demand's downward-sloping character reflects three principal influences as shown in which of the following?
A) People's desire to maintain real wealth holdings, the interest rate, and international trade.
B) People's desire to increase the price level, the interest rate, and the economic growth effect.
C) The interest rate, the economic growth effect, and international trade.
D) Cost-pull inflation, demand-pull inflation, and the need to maintain real wealth holdings.
E) Recession phases of the business cycle, upturns, and downturns.

Question

Quizplus · Accepted Answer

Aggregate demand is the total demand (spending) for goods and services in an economy at a given price level. The downward-sloping character of aggregate demand reflects three principal influences: people's desire to maintain real wealth holdings (wealth effect), the interest rate (interest rate effect), and international trade (foreign trade effect). When prices rise, people's real wealth holdings decrease, causing them to spend less. Higher interest rates lead to decreased borrowing and spending, while international trade can impact an economy in various ways, such as affecting export and import levels. Therefore, option A is the correct choice as it mentions all three principal influences of aggregate demand's downward-sloping character.

Aggregate Demand's Downward-Sloping Character Reflects Three Principal Influences as Shown