The aggregate demand curve illustrates a relationship between
A)interest rates and income levels
B)the price level and real GDP
C)the price level and interest rates
D)income levels and real GDP levels
E)income levels and nominal income levels

Question

Quizplus · Accepted Answer

The aggregate demand curve shows the relationship between the overall price level in the economy and the real GDP demanded by households, firms, and the government. As the price level increases, the demand for goods and services decreases, which is reflected in a downward slope of the aggregate demand curve. On the other hand, when the price level decreases, the demand for goods and services increases, leading to a rightward shift of the aggregate demand curve. The relationship between interest rates and income levels can be captured by other models or graphs, but they are not directly related to the aggregate demand curve.

The Aggregate Demand Curve Illustrates a Relationship Between