A rise in the price level
A)decreases aggregate demand.
B)increases aggregate demand.
C)decreases the quantity of real GDP demanded.
D)increases the quantity of real GDP demanded.
E)has no effect on aggregate demand or on the quantity of real GDP demanded.

Question

Quizplus · Accepted Answer

An increase in the price level leads to a decrease in the quantity of real GDP demanded, as it reduces consumers' purchasing power and reduces the demand for goods and services. This decrease in the quantity of real GDP demanded is reflected in a decrease in aggregate demand. Therefore, choices A and B are incorrect. Similarly, E is incorrect as there is a clear effect on aggregate demand and the quantity of real GDP demanded.

A Rise in the Price Level