The aggregate demand curve slopes downward because at higher price levels
A) the purchasing power of consumers' assets declines and consumption increases.
B) producers can get more for what they produce, and they increase production.
C) the purchasing power of consumers' assets declines and consumption decreases.
D) the purchasing power of consumers' assets increases and consumption increases.

Question

Quizplus · Accepted Answer

As price levels increase, the purchasing power of consumers' assets (such as savings, income, and investments) decline. This means that consumers have less money to spend on goods and services, causing a decrease in consumption. As a result, businesses experience a decrease in demand for their products, leading to a decrease in production and a decrease in overall demand in the economy. Therefore, the aggregate demand curve slopes downward.

The Aggregate Demand Curve Slopes Downward Because at Higher Price