Why does the aggregate demand curve slope downward due to the interest rate effect?

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A decline in prices raises money holdings, causing lending rates to climb and investment to drop.A drop in prices enhances the real value of money, leading to higher consumer expenditures.Lower prices reduce the real value of money, resulting in decreased consumer spending.Falling prices reduce money demand, causing interest rates to fall and investment spending to rise.

Explanation

When prices fall, the demand for money decreases, which lowers interest rates. This reduction in interest rates encourages more investment spending, causing the aggregate demand curve to slope downward due to the interest rate effect.