The open economy effect and the real balance effect are two of the reasons why

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The open economy effect and the real balance effect both contribute to the downward slope of the aggregate demand curve. The open economy effect suggests that higher domestic price levels make domestic goods more expensive relative to foreign goods, reducing exports. The real balance effect indicates that higher price levels reduce the purchasing power of money, leading to lower consumption. Both effects result in a decrease in aggregate demand as price levels rise.

The Open Economy Effect and the Real Balance Effect Are