1. The Wealth Effect/Real Balance Effect: A decrease in the price level raises the real value of money and makes consumers wealthier , which in turn encourages them to spending means a large quantity of goods and services demanded.
2. The Interest-Rate Effect: A lower price level reduce the interest rate, encourage greater spending on investment goods, and thereby increase the quantity of goods and services demanded.
3. The Exchange-Rate Effect/Net Export Effect: When a fall in the U.S. price level cause U.S. interest rate to fall, the real value of the dollar decline in foreign exchange markets .This Depreciation stimulates U.S .net export and thereby increase the quantity of goods and services demanded.