All of the following statements are correct except:
A) an increase in the overall price level will eventually reduce aggregate expenditure.
B) a change in the general price level causes a movement along the aggregate demand curve.
C) a reduction in the overall price level will eventually increase aggregate demand.
D) a reduction in the overall price level will eventually reduce aggregate demand.

Question

Quizplus · Accepted Answer

A reduction in the overall price level typically increases aggregate demand, not reduces it. This is because lower prices increase consumers' purchasing power, leading to higher consumption and investment by businesses, thus shifting the aggregate demand curve to the right.

All of the Following Statements Are Correct Except