Multiple Choice Given aggregate demand, an increase in aggregate supply increases real output and, assuming downward-flexible prices, reduces the price level. When the price level increases, real balances increase and businesses and households find themselves wealthier and therefore increase their spending. As the U.S. price level rises, U.S. goods become relatively more expensive so that U.S. exports fall and U.S. imports rise. As the price level falls, the demand for money declines, the interest rate declines, and interest-rate-sensitive spending increases