Question

which of the following would cause a downward movement along the aggregate demand curve? a. a rise in the price level makes u.s. goods relatively more expensive than foreign goods. b. the value of real wealth rises. c. there is a decline in the expected price level d. a fall in the price level increases savings and lowers interest rates. e. the value of the dollar decreases.

Answer 1

An increase in the price level making U.S. goods relatively more expensive than foreign goods and a decrease in the value of the dollar would cause a downward movement along the aggregate demand curve.

Step-by-step explanation:

The downward movement along the aggregate demand curve occurs when the price level increases, making U.S. goods relatively more expensive than foreign goods. This is represented by option a. The rise in price level reduces the level of consumption and discourages exports, leading to a decrease in total spending in the economy.

This is due to the foreign price effect, which states that when the price level increases, domestic goods become relatively more expensive, resulting in a decline in aggregate demand. Therefore, option e, which states that the value of the dollar decreases, also causes a downward movement along the aggregate demand curve.

On the other hand, options b, c, and d would cause an upward movement along the aggregate demand curve.