Other things equal, along the aggregate demand curve, a higher price level is associated with
A) an increase in the quantity of real GDP demanded.
B) a decrease in the quantity of real GDP demanded.
C) a decrease in the quantity of nominal GDP demanded.
D) higher income levels.

Question

Quizplus · Accepted Answer

A higher price level reduces the purchasing power of money, leading to a decrease in the quantity of real GDP demanded, as consumers and businesses are able to buy less with the same amount of money. This is a reflection of the wealth effect and the interest rate effect.

Other Things Equal, Along the Aggregate Demand Curve, a Higher