Which of the following is NOT an explanation for the shape of the aggregate demand curve?
A) real balance effect
B) interest rate effect
C) open economy effect
D) investment effect

Question

Quizplus · Accepted Answer

The investment effect is actually a key factor that determines the slope of the aggregate demand curve. The real balance effect (A), which dictates that a decrease in the price level will increase the real wealth of households, resulting in higher spending and a rightward shift of the AD curve; the interest rate effect (B), which focuses on the relationship between the price level and interest rates, as a decrease in the price level leads to lower interest rates and greater borrowing and investment; and the open economy effect (C), which states that a decrease in the price level will lead to an increase in net exports, thus increasing overall spending and shifting the AD curve to the right are all key factors that determine the overall shape of the AD curve.

Which of the Following Is NOT an Explanation for the Shape