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Why is the AD curve downward sloping?
Im aware an increase in prices leads to a decrease in AD, but please explain WHY
3 Answers
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- Anonymous7 years ago
On the contrary of the individual market which is supposed to be a normal good, aggregate demand slope is based on IS-LM movement, or equilibrium both in the real and financial market. So it follows mainly the relation between interest rate and real income.
- Anonymous7 years ago
because of inverse relationship between price and demand
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