10. One reason for the downward sloping aggregate demand curve is that higher price levels imply a real exchange rate:

A. depreciates, making domestic goods cheaper in other countries and imports less competitive, resulting in a higher level of net exports.

B. appreciates, making domestic goods more expensive in other countries and imports more competitive, resulting in a lower level of net exports.

C. appreciates, making the country’s exports and imports less competitive and leading to lower net exports.

Show Answer