Which of the following explains why the AD curve is downward sloping?
Which of the following explains why the AD curve is downward sloping?
a. a lower price level forces the government to reduce taxes, shifting the IS curve to the right and increasing income.
b. A lower price level forces the central bank to increase the money supply, shifting the LM curve to the right and increasing income.
c. A lower price level increases real money balances, shifting the LM curve to the right and increasing income.
d. none of the above are correct.
ANSWER
C
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