What is the effect of a decrease in the price level?
A) a downward shift in the aggregate expenditure line
B) a fall in the equilibrium level of output demanded
C) a downward movement along a particular aggregate demand curve
D) a leftward shift in aggregate demand curve

Question

What is the effect of a decrease in the price level?  
A) a downward shift in the aggregate expenditure line 
B) a fall in the equilibrium level of output demanded 
C) a downward movement along a particular aggregate demand curve 
D) a leftward shift in aggregate demand curve

Quizplus · Accepted Answer

A decrease in the price level will lead to a decrease in the cost of goods and services, leading to an increase in the quantity demanded. This will cause movement along a particular aggregate demand curve, leading to a downward movement. The other options are incorrect, as a decrease in the price level will not lead to a downward shift in the aggregate expenditure line, but rather a movement along it, and it will not lead to a fall in the equilibrium level of output demanded or a leftward shift in aggregate demand curve.

What Is the Effect of a Decrease in the Price