AP Macroeconomics Question 43: Answer and Explanation
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5. The aggregate demand curve has a negative slope in part because when the price level increases
- A. the value of cash increases
- B. imports become relatively more expensive
- C. the real quantity of money increases
- D. the interest rate increases
- E. exports increase
Correct Answer: D
D When the price level increases, the value of cash decreases and imports become relatively less expensive. Exports decrease because they become relatively more expensive. The real quantity of money decreases, thus increasing the interest rate and decreasing investment and real GDP.