Why does aggregate demand curve slope downward according to the wealth effect?

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A drop in price levels raises the real value of money holdings, leading to higher consumer expenditure.A decline in prices lowers the real worth of money holdings, causing consumers to spend less.Falling prices reduce money holdings, boost lending, lower interest rates, and increase investment spending.Decreasing prices increase money holdings but reduce lending, causing interest rates to rise and investment to decline.

Explanation

The wealth effect explains that when prices fall, the purchasing power of money holdings rises, which encourages consumers to increase their spending, resulting in a downward-sloping aggregate demand curve.