Question

The effect of an increase in the price level on the aggregate-demand curve is represented by a a. shift to the right of the aggregate-demand curve. b. shift to the left of the aggregate-demand curve. c. movement to the left along a given aggregate-demand curve. d. movement to the right along a given aggregate-demand curve.

Answer 1

Answer:

C. Movement to the left along a given aggregate demand curve

Explanation:

Demand is the quantity of a good or service consumers are willing to buy at a given price over a given period of time. Price and demand tend to have a negative relationship. As price of a product increases, demand decreases as it is now more expensive and less affordable. On the other hand, when price decreases, demand increases as it is now cheaper than before.

To answer the question, as the price of a product increases, the quantity demanded falls, hence causing the leftward movement along the demand curve. A fall in price on the other hand, will cause a rightward movement along the demand curve.

Any other factor other than price such as a change in population, availability of substitutes and price of complementary products can cause a shift in the demand curve. If the factor is favorable, it causes a right-hand shift and if it is unfavorable, it causes a left-hand shift.