Principles of Macroeconomics / Unit 8 MAC 0704 short lesson, about 20 seconds
Why Aggregate Demand Slopes Down
Captions available
The idea
Three effects. A higher price level erodes the buying power of wealth, so consumption falls. It raises interest rates, so investment falls. It makes exports dearer, so net exports fall.
In practice
Wealth acts on consumption, interest rates on investment, and relative prices on net exports.
Where people slip
Government purchases contribute nothing to the slope, because they are set politically rather than by the price level.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
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