Asked by Wajih Hashmi on May 19, 2024
Verified
A fall in the price level will:
A) cause an upward movement upward along the aggregate demand curve.
B) cause a downward movement along the aggregate demand curve.
C) cause a leftward shift of the aggregate demand curve.
D) cause a rightward shift of the aggregate demand curve.
E) have no impact on the aggregate demand curve.
Price Level
The average of current prices across the entire spectrum of goods and services produced in the economy, used to measure inflation and purchasing power.
Aggregate Demand Curve
A curve representing the relationship between the economy’s price level and real GDP demanded per period, with other things constant.
- Explain the impact of changes in the price level on aggregate demand and aggregate output.
Verified Answer
KH
Karandeeep HandaMay 23, 2024
Final Answer :
B
Explanation :
A fall in the price level would increase the purchasing power of consumers, leading to an increase in aggregate demand. This would cause a downward movement along the aggregate demand curve, as shown by the movement from point A to point B in the graph below.
Learning Objectives
- Explain the impact of changes in the price level on aggregate demand and aggregate output.