For Canada, the most important reason for the downward slope of the aggregate demand curve is the real exchange-rate effect.

Question

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The real exchange-rate effect, which refers to the impact of changes in the exchange rate on domestic demand for goods and services, is a significant factor in shaping Canada's aggregate demand curve. As the value of the Canadian dollar rises, domestically produced goods become more expensive relative to foreign goods, leading to a decrease in demand from Canadian consumers and businesses. This in turn reduces the overall level of aggregate demand in the economy.

For Canada, the Most Important Reason for the Downward Slope