How does the aggregate demand curve typically slope?

The aggregate demand curve typically slopes downward from left to right due to the inverse relationship between the price level and the quantity of goods and services demanded in an economy. As the overall price level decreases, consumers and businesses are more inclined to purchase more goods and services, leading to an increase in aggregate demand. This phenomenon can be attributed to three main effects:

1. Wealth Effect: When the price level falls, the real value of money and other assets increases, making consumers feel wealthier and encouraging them to spend more.

2. Interest Rate Effect: A lower price level tends to reduce interest rates, making borrowing cheaper and stimulating investment and consumption.

3. Net Exports Effect: When domestic prices fall, exports become less expensive for foreign buyers, potentially increasing the demand for domestic goods on the international market while making imports relatively more expensive.

These factors collectively contribute to the downward slope of the aggregate demand curve, which highlights that as the price level decreases, the quantity of goods and services demanded increases, reflecting the basic principles of demand in economics.