Question

Which of the following would help explain why the aggregate demand curve slopes downward? Group of answer choices An unexpectedly low price level raises the real wage, which causes firms to hire fewer workers and produce a smaller quantity of goods and services. A lower price level causes domestic interest rates to rise and the real exchange rate to appreciate, which stimulates spending on net exports. A higher price level increases real wealth, which stimulates spending on consumption. A lower price level reduces the interest rate, which encourages greater spending on investment goods.

Answer 1

Answer:

A lower price level reduces the interest rate, which encourages greater spending on investment goods.

Explanation:

A lower price level reduces the interest rate, encourages greater spending on investment goods which thus, increases the quantity of goods and services demanded. Conversely, a higher price level raises the interest rate, discourages investment spending, and decreases the quantity of goods and services demanded.