The intertemporal substitution effect of the price level on aggregate demand
A) is the same as the real wealth effect.
B) is one reason that the aggregate demand curve has a negative slope.
C) explains why aggregate demand increases when the amount of money increases.
D) is one reason that the aggregate demand curve has a positive slope.

Question

Quizplus · Accepted Answer

The intertemporal substitution effect explains why individuals may change their spending and saving behavior based on the relative cost of consumption at different times, which contributes to the negative slope of the aggregate demand curve as prices and interest rates affect consumption choices.

The Intertemporal Substitution Effect of the Price Level on Aggregate