CAIE A-Level Economics 4.3.4 Aggregate Demand Curve Shape

CAIE A-Level Economics 4.3.4 Aggregate Demand Curve Shape
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise explaining downward-sloping aggregate demand through real wealth, interest-rate and international-competitiveness effects as the general price level changes.

How this is tested

  • link a lower price level to greater real wealth and higher consumption from money balances
  • explain how lower prices can reduce interest rates and support consumption or investment
  • explain how improved international competitiveness raises exports and reduces import demand

Question 18

[Maximum number: 1]

The aggregate demand curve is typically downward sloping.
What is one possible explanation for this?

A

A fall in the price level will lead to a rise in demand for imports.

B

As the price level falls, improved productivity will reduce unit costs.

C

If the price level is high, any interest rate changes will encourage consumption.

D

The real value of assets increases as the price level falls.