When the U.S. price level decreases, we would expect a:
A) movement down along the aggregate demand curve.
B) shift straight up of the aggregate demand curve.
C) shift to the right of the aggregate demand curve.
D) movement up along the aggregate supply curve.

Question

Quizplus · Accepted Answer

When the U.S. price level decreases, it leads to an increase in purchasing power of both consumers and firms. This, in turn, leads to an increase in aggregate demand as consumers and firms increase spending, leading to a movement down along the aggregate demand curve.