Which of the following is not a reason why the aggregate demand curve slopes downward ?
Correct answer: C. The classical dichotomy/monetary neutrality effect
- A. The exchange-rate effect
- B. The wealth effect
- C. The classical dichotomy/monetary neutrality effect
- D. The interest-rate effect
Explanation
The exchange-rate, wealth, and interest-rate effects explain why a lower price level raises aggregate quantity demanded. Classical dichotomy and monetary neutrality describe long-run separation of real and nominal variables, not the downward slope of aggregate demand.
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