The aggregate demand curve slopes downward because of the real balances,interest-rate,and net exports effects.

Question

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The downward slope of the aggregate demand curve is due to the real balances effect (higher prices reduce the purchasing power of money), the interest-rate effect (higher prices lead to higher interest rates, which reduce consumer and business spending), and the net exports effect (higher prices reduce exports and increase imports, reducing net export demand).

The Aggregate Demand Curve Slopes Downward Because of the Real