One reason that the aggregate demand curve slopes downward is because
A) higher price levels increase real wealth and consumption.
B) higher price levels reduce net exports.
C) higher price levels reduce interest rates.
D) higher price levels increase investment.

Question

Quizplus · Accepted Answer

Higher price levels reduce net exports because as the domestic price level rises, other countries' goods become relatively cheaper and domestic goods become relatively more expensive, leading to a decrease in exports and an increase in imports. This results in a decrease in net exports and a shift in the aggregate demand curve to the left. Choices A, C, and D do not explain why the aggregate demand curve slopes downward.

One Reason That the Aggregate Demand Curve Slopes Downward Is