Which one of the following does NOT explain why the aggregate demand curve is downward sloping?

Question

Quizplus · Accepted Answer

The loanable funds effect explains why an increase in interest rates causes a decrease in investment spending and therefore a decrease in aggregate demand, contributing to the downward slope of the aggregate demand curve. The real balances effect explains why an increase in price levels decreases the purchasing power of money balances, reducing consumer spending and contributing to the downward slope of the aggregate demand curve. The foreign purchases effect explains how an increase in price levels in the domestic economy can make foreign goods more attractive relative to domestic goods, leading to a decrease in net exports and a decrease in aggregate demand. The interest rate effect explains how an increase in price levels increases the demand for money, causing an increase in interest rates which reduces consumption and investment spending, contributing to the downward slope of the aggregate demand curve. None of these effects are related to the loanable funds effect.

Which One of the Following Does NOT Explain Why the Aggregate