Question

"Give the three reasons the aggregate demand curve slopes downward. The U.S. aggregate demand curve slopes downward due to all of the following reasons except the A. ​international-trade effect, where a change in the price level affects net exports. B. ​government-spending effect, where a change in the price level affects government purchases. C. ​interest-rate effect, where a change in the price level affects investment. D. wealth​ effect, where a change in the price level affects consumption."

Answer 1

The U.S. aggregate demand curve slopes downward due to all of the following reasons except the "government-spending effect, where a change in the price level affects government purchases".

Option: B

Explanation:

The total consumption, production is reflected in the aggregate demand curve, government purchases and net exports in any time period at each price level. It slopes down due to the impact of wealth on consumption, the effect of interest rates on investment and the effect of global trade on net exports.

AD describes the relationship between the total amount of required production (calculated as real GDP) and the level of the market (as the implied price deflator). The aggregate amount of goods and services offered at each price point is the number of the components of real GDP. There is a negative relationship between the amount of prices and the total quantity of goods and services provided, unchanged for everything else.