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    Higher prices without higher income

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    Which of the following is a reason why the aggregate demand curve slopes downward?

    A. At a higher price level, fewer goods and services are available.
    B. Periods when the price level is rising are usually times of swift declines in economic activity.
    C. Households feel poorer with an increase in average prices.
    D. If the U.S. price level rises, foreigners will buy more U.S. goods, leaving fewer U.S. goods for domestic consumers.
    E. As the price level rises, business leaders become pessimistic about the future and reduce production.

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    Solution Preview

    C. Households feel poorer with an increase in average prices.

    Higher prices without higher income lowers the ...

    Solution Summary

    An explanation for why aggregate demand curve slopes downward is provided.

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