Question

1. Explain why the Aggregate Demand curve is downward sloping?

1. Explain why the Aggregate Demand curve is downward sloping?

Homework Answers

Answer #1
  • Aggregate demand curve is nothing but the sum total of all the demands In the economy in terms of purchases made by the government, consumptions, investments made etc at each price level at any particular period of time.
  • It slopes downward as the price level and the output are inversely related to each other.
  • As output decreases, price level increases and vice versa. Also, as price level increases, national income also drops down and vice versa.
  • It slopes downward also because demand and price level are inversely related to each other.
  • As the price level decreases, goods become competitive due to higher demand leading to greater exports.
  • Also, as the price level decreases, income of the consumers rises up leading to increased spending over goods.
  • For above all the reasons aggregate demand curve slopes downward.
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