Question

The wealth effect, interest-rate effect, and exchange-rate effect are all explanations for a. the slope of short-run aggregate supply. b. everything that makes the aggregate-demand curve shift. c. the slope of long-run aggregate supply. d. the slope of the aggregate-demand curve.

Answer 1

The correct answer is letter "D": the slope of the aggregate demand curve.

Step-by-step explanation:

The aggregate demand curve is downward sloping. It implies price levels are falling and the quantity of output will increase as well as the domestic income. The theories that can explain why the aggregate demand curve is downward sloping: the Pigou's wealth effect, the Keynes's interest-rate effect, and the and Mundell-Fleming's exchange-rate effect.