Chapter 17, Problem 6MCQ

To determine

The question requires us to determine the factor which changes consumer spending and aggregate price level.

Explanation of Solution

The aggregate demand curve shows the relationship between the price level and aggregate quantity demanded by households, firms, the government, and foreign nations.

The wealth effect of a price change is a change in consumer spending when the purchasing power of consumers’ assets changes. A rise in the price level causes consumer spending to fall and leads to a downward-sloping aggregate demand curve.

Thus, option “c” is correct.