True or false: the aggregate demand curve demonstrates an inverse relationship between the price level and real GDP.True false question.TrueFalse

Answer

True.

The aggregate demand (AD) curve illustrates the total quantity of goods and services demanded across all levels of the economy at various price levels. It is typically represented as downward sloping, which indicates an inverse relationship between the price level and real GDP.

When the price level rises, the purchasing power of money decreases, leading consumers to reduce their spending, which in turn results in lower aggregate demand. Conversely, when the price level falls, the purchasing power of money increases, prompting consumers to spend more, thereby increasing aggregate demand. This relationship emphasizes that as prices increase, the quantity of goods and services demanded decreases, and vice versa, thereby affirming the statement as true.

In summary, the aggregate demand curve indeed demonstrates an inverse relationship between the price level and real GDP, reflecting fundamental economic principles of consumer behavior and market dynamics.