Question

Nicole prefers to keep her $50 000 retirement savings buried in the backyard. After an increase in the price level, Nicole reduces the amount of goods and services she wants to purchase. Nicole's rationalization, that now her retirement savings won't buy as much, is consistent with which explanation of the aggregate demand curve's negative slope?

Answer 1

Yes, the aggregate demand curve is negatively sloped that means as the price of the goods and services rises the demand for those goods and services will decrease.

The reason for that is at a higher price the satisfaction the consumer get form buying that good reduce leading to a decreased demand and when the price of the good rises by spending the same amount as before the consumer feel poorer with the income they have.

Here, If Nicole wants to buy the same amount of goods and services she has to spend more income. And because of limited income, she has to decrease the amount of goods she will purchase.