The aggregate demand curve
A) is vertical at the full-employment level of output.
B) is horizontal at the full-employment level of output.
C) is downward sloping.
D) is upward sloping.

Question

Quizplus · Accepted Answer

The aggregate demand curve is downward sloping, meaning that as the price level decreases, the quantity of goods and services demanded increases, and vice versa. This is due to the wealth effect, interest rate effect, and net export effect, all of which cause changes in consumer and business spending as well as international trade. The full-employment level of output has no impact on the slope of the AD curve.

The Aggregate Demand Curve