The downward slope of the aggregate-demand curve shows that:

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Question restatement: The downward slope of the aggregate-demand curve shows that:

Option A: 'a fall in the price level reduces the overall quantity of goods and services demanded' — This is incorrect. A lower price level generally increases real wealth and lowers the cost of borrowing, which tends to raise, not reduce, the total quantity of goods and services demanded.

Option B: 'a fall in the price level increases the overall quantity of goods and services supplied' — This is misleading. The aggregate-demand curve shows the relationship between the price level and the quantity of goods and services demanded, not supplied. A fall in the price level affects demand, not directly supply, so this statement misattributes the effect to supply.

Option C: 'a fall in the price level increases the overall quantity of goods and services demanded' — This is the correct interpretation. When the price level falls, the real value of money rises, households feel wealthier (wealth effect), borrowing becomes cheaper which stimulates spending (interest-rate effect), and exports become more competitive abroad while imports fall (exchange-rate effect). All of these factors increase the quantity of goods and services demanded.

Option D: 'a rise in the price level increases the overall quantity of goods and services demanded' — This is incorrect. A higher price level tends to reduce real purchasing power and depress demand, so it does not increase quantity demanded.

Summary of why the correct option fits: The downward slope of the aggregate-demand curve reflects the general inverse relationship between the price level and the quantity of aggregate demand, driven by the wealth, interest-rate, and net-export effects. The incorrect options either confuse demand with supply, misstate the direction of the relationship, or attribute the effect to the wrong economic channel.

The downward slope of the aggregate-demand curve shows that:

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