1. Real-Balances Effect

Multiple Choice

1. Real-Balances Effect
2. Household Expectations
3. Interest-Rate Effect
4. Personal Income Tax Rates
5. Profit Expectations
6. National Incomes Abroad
7. Government Spending
8. Foreign Purchases Effect
9. Exchange Rates
10. Degree of Excess Capacity
Answer the question based on the accompanying list of factors that are related to the aggregate
demand curve. Which of the factors best explain the downward slope of aggregate demand curve?

A) 2, 4, and 6
B) 7, 9, and 10
C) 1, 3, and 8
D) 4, 6, and 7