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mina [271]
2 years ago
7

Which of the following explains why the aggregate demand curve is downward sloping?a. The interest rate effectb. The real balanc

e effectc. The open economy effectd. All of these
Business
1 answer:
pishuonlain [190]2 years ago
7 0

<u>Answer: </u>

The interest rate effect explains why the aggregate demand curve is downward sloping.

<u>Explanation: </u>

  • The interest rate effect proposed by Keynes suggests the reasons for why is the aggregate demand curve downward sloping.
  • It states that, when the interest rates are low, people choose to invest owing to the decreased costs of investment. This investment stimulates a drop in the levels of price.
  • The dropped prices thus increase the aggregate demand for the commodities of which the price has dropped.
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