3. Why the aggregate demand curve slopes downward The following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 120, and ' demanded is $500 billion. Moving up along the aggregate demand curve from point A to point B, the price level rises to 140, an output demanded falls to $300 billion. ('2) 170 160 150 140 130 PRICE LEVEL 120 110 100 90 0 100 200 300 400 500 600 700 800 OUTPUT (Billions of dollars) As the price level rises, households' real wealth will v , causing the quantity of output demanded to . Additionally, as the price level rises, the impact on the domestic interest rate will cause the real value of the dollar to V in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore 7 , and the number of foreign products purchased by domestic consumers and rms (imports) will V . Net exports will therefore causing the quantity of domestic output demanded to v . v