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Aggregate demand curves slope downwards for each of the following reasons except: A
Aggregate demand curves slope downwards for each of the following reasons except:
A.foreign price effect
B.the wealth effect
C.the interest rate effect
D.the substitution effect
Expert Solution
The correct option is D. the substitution effect.
Explanation:
Aggregate demand is a macroeconomic concept, while the substitution effect explains an individual's action in the market. The substitution effect transfers an individual's interest from one product to another, but the overall consumption of products will remain the same. The substitution effect does not change the aggregate demand as aggregate demand includes overall demand in the economy.
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