The aggregate demand curve shows the relationship between the price level and co

Question

The aggregate demand curve shows the relationship between the price level and consumption. The aggregate demand curve is downward sloping because as income increases it causes an increase in the amount of planned expenditures. a decrease in government spending reduces prices and makes consumption demand increase. an increase in the price of a good causes a decrease in market demand for that good. an increase in the price level reduces real money holdings, which reduces the amount of expenditures.

Explanation / Answer

Option C is the correct option.

As per law of demand, higher the price level, lower is the quantity demanded as people will shift to substitute goods.

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