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 140, and the quantity of output demanded is $300 billion. Moving down along the aggregate demand curve from point A to point B, the price level falls to 120, and the quantity of output demanded rises to $500 billion. ?) 170 160 150 140 130 500, 120 PRICE LEVEL 120 10 AD TOO 100 200 300 400 500 600 700 OUTPUT (Billions of dollars) As the price level falls, the cost of borrowing money will , causing the quantity of output demanded to Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to * in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore , and the number of foreign products purchased by domestic consumers and firms (imports) will . Net exports will therefore causing the quantity of domestic output demanded to