Which of the following would not be an expected response from a decrease in the price level and so help to explain the slope of the aggregate-demand curve?
A) When interest rates fall,Sleepwell Hotels decides to build some new hotels.
B) The exchange rate falls,so French restaurants in Paris buy more Iowa pork.
C) Janet feels wealthier because of the price-level decrease and so she decides to remodel her bathroom.
D) With prices down and wages fixed by contract,Millio's Frozen Pizzas decides to lay off workers.

Question

Quizplus · Accepted Answer

The expected response to a decrease in the price level is an increase in aggregate demand. Option D indicates a decrease in aggregate demand when Millio's Frozen Pizzas laid off workers due to fixed wages, which does not explain the inverse relationship between the price level and aggregate demand. Therefore, option D would not be an expected response to a decrease in the price level and does not help to explain the slope of the aggregate-demand curve. A, B, and C are expected responses indicating an increase in aggregate demand due to lower interest rates, increased purchasing power, and increased foreign demand, respectively.

Which of the Following Would Not Be an Expected Response