One reason that the aggregate demand curve has a negative slope is that when the domestic price level rises,
A) firms produce more goods and services.
B) firms produce fewer goods and services.
C) people substitute toward more imported goods and services.
D) peoples' wealth increases.

Question

Quizplus · Accepted Answer

When the domestic price level rises, people tend to find imported goods and services relatively cheaper, leading them to substitute domestic goods and services with imports. This substitution effect contributes to the negative slope of the aggregate demand curve.

One Reason That the Aggregate Demand Curve Has a Negative