According to new classical economics, the wealth effect, the interest rate effect, and the foreign trade effect:
A) keep the economy from operating at full employment.
B) cause the aggregate supply curve to be upward sloping.
C) cause the aggregate demand curve to be downward sloping.
D) none of the above.

Question

Quizplus · Accepted Answer

The wealth effect, interest rate effect, and foreign trade effect are reasons why the aggregate demand curve is downward sloping. These effects explain how changes in the price level impact the quantity of goods and services demanded.

According to New Classical Economics, the Wealth Effect, the Interest