(Answered) a. Ine oownsioping aggregate oemana curve can be explainea bythe interest-rate effect, the…

a.
A downsloping aggregate demand curve can be explained by the interest-rate effect, the real-balances effect, and the foreign purchases effect.
b.
The explanation for a downsloping aggregate demand curve differs from the explanation for a single product because:
A downsloping aggregate demand curve assumes constant money income, so substitution toward a now relatively cheaper product for those whose prices have risen does not occur.
A downsloping aggregate demand curve reflects changes in the overall price level rather than relative prices among individual goods, so the usual single‑product substitution effect is not the primary explanation.
A downsloping single‑product demand curve assumes other prices and income are held constant, so consumers substitute toward a relatively cheaper product when its price falls.
The single‑product demand curve relies on relative price changes among goods, whereas the aggregate demand curve reflects economy‑wide price level changes and their effects on aggregate spending.
c.
The multiplier:
causes an initial change in spending to generate an equal change in saving.
equalizes the change in spending and the change in aggregate demand.
causes an initial change in spending to generate an even larger change in the aggregate demand.
reduces the impact of spending changes on the aggregate demand curve.
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