According to the new classical approach to aggregate demand:
A) increases in interest rates cause people to buy more because they are getting better returns on their investments.
B) increases in the economy's general level of prices cause people to buy more foreign-produced goods and services.
C) increases in the economy's general level of prices cause the value of people's accumulated wealth to increase, which causes them to buy more.
D) all of the above.

Question

Quizplus · Accepted Answer

Increases in the economy's general level of prices can lead to a substitution effect where consumers opt for cheaper foreign-produced goods and services, reflecting the new classical approach's view on how price levels can affect aggregate demand through changes in consumption patterns.

According to the New Classical Approach to Aggregate Demand