The real wealth effect provides a partial explanation for why the aggregate demand curve slopes downward.Which of the following statements best explains the real wealth effect?
A) At a lower price level domestically produced items are relatively less expensive than foreign goods and therefore are in greater demand.
B) At a lower price level the real interest rate tends to be lower,and thus the quantity of investment goods demanded is larger.
C) At a lower price level consumers will buy less because of a reduction in the real money supply.
D) At a lower price level the purchasing power of accumulated savings is larger,and thus consumers will purchase more goods.
Correct Answer:
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