The question requires us to determine the option which doesn’t explain the slope of the aggregate demand curve.
Explanation of Solution
The relationship between the price level and the quantity demanded by consumers, businesses, the government, and foreign countries is represented by the aggregate demand curve.
The graph representing aggregate demand slopes downward. It slopes downward as a result of the following three factors; the wealth effect, the effect of interest rates, and the effect of net exports
The slope of the aggregate demand curve is not explained by the effect of product substitution. A decrease in demand for good X while an increase in demand for good Y does not affect the market's overall aggregate demand in case of changing in the composition of two substitutes, X and Y. A decrease in demand for one good in the market offset a rise in demand for another good.
So, option “c” is correct.
Chapter 17 Solutions
Krugman's Economics For The Ap® Course
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education