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Why does the Aggregate Demand curve slope downward? People buy less at higher prices. The Interest...

Why does the Aggregate Demand curve slope downward?

People buy less at higher prices.

The Interest Rate Effect and Real Wealth Effect give the downward slope.

The Income and Substitution Effects decrease consumption when prices rise.

All market demand curves slope downward.
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Answer #1

The correct answer is 'Option A'.

The aggregate demand is the sum of all the individual demands in the economy. The aggregate demand curve is downward sloping which shows that the price and quantity demanded are inversely related to each other. When the price is low then the consumers demand more units and the quantity demanded falls when the price rises. So, that is why the aggregate demand curve is downward sloping. Therefore, the correct answer is 'Option A'.

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