Question

Match the cause for the negatively sloped aggregate demand curve on the left with the correct term from the right.

1. As prices rise, the cost for businesses to finance new equipment increases, causing a drop in quantity demanded of real GDP.

2.The purchasing power of money held in savings accounts falls as prices rise.

3.As prices rise in the U.S., foreigners purchase fewer U.S. goods.

OPTIONS:

a.The Aggregate Demand Effect

b. The Wealth Effect

c. The Interest Rate Effect

d. The Expport Effect

Answer 1

The negatively sloped aggregate demand curve can be explained by the interest rate effect, wealth effect, and export effect.

Step-by-step explanation:

1. As prices rise, the cost for businesses to finance new equipment increases, causing a drop in the quantity demanded of real GDP - The Interest Rate Effect

2. The purchasing power of money held in savings accounts falls as prices rise - The Wealth Effect

3. As prices rise in the U.S., foreigners purchase fewer U.S. goods - The Export Effec